BQ Scotland Issue 15

www.bq-magazine.co.uk

ISSUE FIFTEEN: SPRING 2014

Marvels in morphsuits How a love of fancy dress became a thriving business back from the brink The assets management boss who overcame a career crisis wired and wonderful Boss with old-fashioned values is creating new opportunities thinking out of the box Revolutionary product gives power back to TV advertisers

grand design The Scotsman whose home is also his castle . . . and business ISSUE FIFTEEN: SPRING 2014: SCOTLAND EDITION

BUSINESS NEWS: COMMERCE: FASHION: INTERVIEWS: MOTORS: EVENTS

SCOTLAND EDITION

BQ Breakfast - daily insight, news and analysis to help grow your business. Register free at www.bq-magazine.co.uk Business Quarter Magazine

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WELCOME

BUSINESS QUARTER: SPRING 14: issue FIFTEEN Welcome to BQ Scotland. This is our 15th edition and we hope you find something worthwhile and enjoyable to read. This month we have a fine balance between more traditional business lives – with Sir Jack Stewart-Clark at Dundas Castle – and the Facebook generation success story with the remarkable guys from Morphsuits. The common denominator: the absolute passion for what they do.

Anyway, it looks touch and go. Who would have thought the referendum vote on Scottish independence would start to be such a tight contest? There is now an ever-increasing chance that Scotland might just vote ‘Yes’ to splitting up from the rest of the UK. It’s unlikely to be an overwhelming vote.

However, reading the runes, many people living in Scotland want to move on from the status quo and Devo-Max isn’t really very sexy. While the power and economic strength of London as a ‘World Super City’ might have an impact on the complexion of ordinary people’s thinking, all across the regions of the UK, outside the south-east of England, there is a sense that we aren’t getting a fair share.

What is more is that Scotland’s business community has been relatively muted in its outright opposition to an independent Scotland. Certainly, there have been the serious announcements from Standard Life, Shell, BP and some of the big boys, about currency and pensions fund issues, but many SMEs are preparing for whatever comes their way with the singular resilience and sturdiness that makes them Scottish businesses in the first place.

The narrative about ‘grown-up Scotland going its own way in the world’ appears to be percolating through several layers of society and playing on the hearts and minds of many undecided Scottish voters. Perhaps a summer hiatus will hose down the debate, but unless there is a massively controversial backlash, the march of the ‘Yes’ campaign is difficult to counter in emotional terms.

At the Entrepreneurial Exchange’s inspirational conference in Gleneagles, there was a resoundingly positive message for many of the

wealth creators among the packed audience.

While most would not readily see themselves voting to break up the Union, entrepreneurs are pragmatic, eager to embrace change, and get around obstacles.

It is in their DNA. However, if we do go it alone, there needs to be an understanding of what this actually entails. There could be a brief honeymoon period but it will be a case of dealing with a myriad of issues both large and small. It means speaking politely and with manners, rather than ‘Whae’s Like Us’ rhetoric. Scottish business must start to put in place its contingency planning. If you are, as IoD director David Watt says, a painter and decorator in Inverurie you might not be too bothered, but a pension company, such as Aegon UK in Edinburgh, faces other decisions.

One suggestion from BQ, should we vote Yes, is the re-establishment in Edinburgh or Glasgow of a Scottish Stock Exchange – that might be a way to garner investment for a new generation of Scottish companies.

It’s going to be an interesting six months. A period that will define the future for all of us – whether we like it or not.

Just before you get started on this edition, let me remind you of the BQ Scotland Export Awards at the Glasgow Science Centre in May, supported by Scottish Enterprise. It will be a great event and the shortlisted Scottish companies are credit to the nation. Hope to see you there.

Kenny Kemp, BQ Scotland

CONTACTS room501 ltd Christopher March Managing Director e: chris@room501.co.uk Bryan Hoare Director e: bryan@room501.co.uk EditorIAL Kenny Kemp Editor e: editor@bq-scotland.co.uk Design & production room501 e: studio@room501.co.uk Photography KG Photography e: info@kgphotography.co.uk advertising David Hughes e: davidh@room501.co.uk t: 07789 397 526 Michelle Farquhar e: michelle@room501.co.uk t: 07551 171 211

room501 Publishing Ltd, Spectrum 6, Spectrum Business Park, Seaham, SR7 7TT www.room501.co.uk room501 was formed from a partnership of directors who, combined, have many years of experience in contract publishing, print, marketing, sales and advertising and distribution. We are a passionate, dedicated company that strives to help you to meet your overall business needs and requirements.

All contents copyright © 2014 room501 Ltd. All rights reserved.

While every effort is made to ensure accuracy, no responsibility can be accepted for inaccuracies, howsoever caused. No liability can be accepted for illustrations, photographs, artwork or advertising materials while in transmission or with the publisher or their agents. All information is correct at time of going to print, March 2014. room501 Publishing Ltd is part of BE Group, the UK’s market leading business improvement specialists. www.be-group.co.uk

SCOTLAND EDITION

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BQ Magazine is published quarterly by room501 Ltd.

BUSINESS QUARTER | SPRING 14

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Features

46 bOUNCING BACK The assets management boss who overcame a career crisis

26 long way home Entrepreneur’s fascinating journey that led to a home-spun business venture

34 the Deal-maker Venture capitalist Calum Paterson on helping businesses reach their potential

40 superheroes How a love of fancy dress led to a MARVEL-lous business idea

BUSINESS QUARTER | SPRING 14

54 switched on How a company boss’s old-fashioned values are creating new opportunities

58 Business lunch In-demand professor discusses her passion for marketing and teaching

76 TV times The revolutionary product that puts power back in the hands of advertisers

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34 marvels in morphsuits

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TENTS SCOTLAND EDITION

50 commercial property

The latest deals and developments in this key sector

wired and wonderful

62 wine Bank boss prepares for a French holiday by sampling two of the country’s wines

Regulars

64 motoring Putting the £48,000 Infiniti Q50 through its paces

68 equipment 08 on the record Does London’s dominance of the UK economy impact negatively on Scotland?

14 News A round-up of key developments across the country

24 as i see it The scandal of mis-sold interest rate hedging products is at a crucial stage

Gem of an idea that could revolutionise the diamond industry

72 fashion

54 wining & dining with the dean

The family firm that has won countless celebrity endorsements

80 bit of a chat With BQ’s backroom boy Jock Yuler

82 events Key business events for your diary happening across Scotland

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58 BUSINESS QUARTER | SPRING 14

ON THE RECORD

SPRING 14

>> London calling – but is this to Scotland’s detriment?

It’s a brilliant quotation and one that First Minister Alex Salmond obviously likes and repeated on his recent sojourn to London.

Professor Tony Travers, the director of the LSE London, the research centre for the London School of Economics, in the FT, said: “London is the dark star of the economy, inexorably sucking in resources, people and energy.

Nobody quite knows how to control it.”

He was talking about the world’s Number One global city which also happens to be the capital of the United Kingdom, at least until late September this year. There is no question that London’s domination of the UK economy is exacerbating regional differences across the country and needs to be addressed. But what has not been factored in is the impact this has on Scotland, considering the number of

BUSINESS QUARTER | SPRING 14

business people living north of the Border who do business in the capital regularly.

Whether this dominance by this great metropolis continues to be played out in the referendum debate remains to be seen, but both Yes and Better Together sides are certain to put their spin on this matter.

It appears that London has driven the recovery since the banking collapse and takes in the lion’s share of foreign direct investment, which is 45% of all projects in 2012, according to Ernst & Young.

So how is the Scottish economy doing?

The latest economic data from the Fraser of Allander Institute at the University of Strathclyde provides further evidence of a strengthening recovery.

GDP forecast for 2014 is 2.3%, an upward revision from 1.7% in October last year, while next year the prediction is 2.3%, up 0.2%.

Positive growth has now been recorded for the Scottish economy in the last six quarters. In the third quarter, GDP in Scotland was -0.9% below the pre-recession peak, whereas UK GDP stood at -1.9% below its pre-recession peak more than five years ago.

But during 2013, the UK recovery has again been stronger in each of the three quarters of published data so far.

“When oil and gas production is removed from the UK figures to make UK GDP comparable to the Scottish data, which do not include offshore production, we find that the long period of weak oil and gas production has resulted in the UK GDP – ex oil & gas – having a much stronger recovery from recession than Scottish GDP,” says Professor Brian Ashcroft in his commentary.

Scottish GDP has recovered by 4.9% since the trough of recession while UK GDP – ex oil & gas – has recovered by 6.8% from its trough.

A recurring question if Scotland votes ‘Yes’ to breaking away from the rest of the UK, is how will the remaining oil assets in the North Sea be extracted? A warning from Ben Van Beurden, the chief executive of Royal Dutch Shell, who says he is disappointed

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with the North Sea returns, suggests that the performance in the sector is not good enough, and that anything which might add extra costs is likely to be harmful to investment in newer fields. Although this might mean some of the smaller, sleeker outfits could take over some of Shell’s ageing assets.

At the industry level, Scottish services’ growth is underperforming the overall performance of the economy in the recovery, whereas that is not the case in the UK where the recovery in services has been somewhat quicker, says Brian Ashcroft.

The production sector has boosted Scottish growth, growing by nearly 10% in the recovery, although it has been a significant drag on the recovery in the UK, partly a consequence of the weakness of oil & gas production on the UK production and GDP figures.

Scottish manufacturing GVA continues to stand at -4.6% below the 2008-09 prerecession peak, while the figure for UK manufacturing has dropped slightly to -9% from -9.8% in the second quarter.

Manufacturing is the main driver of the differential performance in production between Scotland and the UK. Scotland’s unemployment rate now stands at 7.1% compared to 7.2% in the UK. Scottish jobs are now -0.2% below their pre-recession peak, which continues to be worse than the UK. “Overall, the pace of the recovery in the Scottish economy is accelerating and becoming more broadly based than previously.

However, for some sectors trading conditions are still harsh, suggesting that the recovery remains fragile and policy action may be required to ensure that it is sustainable,” said Prof Ashcroft.

Prof Ashcroft concludes: “We don’t want to dampen London’s growth. We want to spread it.”

All those on the red-eye Shuttles to Heathrow and EasyJet flights to Luton to each week will agree with that. n

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ON THE RECORD

SPRING 14

>> Is tidal power reaching the crest of a wave?

After 10 years of marine energy research and development in Orkney are we on the cusp of a major breakthrough? Nick Terry reports The test sites off the rugged coastline of Orkney are in some of the roughest sea conditions in the world. Here the tidal rush forcing itself through the gap between the North Sea and the Atlantic creates a fantastic surge of natural forces. But, with the European Marine Energy Centre in Kirkwall now ten years old, how near is Scotland to harnessing this massive form of power on a large-scale commercial basis?

The Scottish Government believes the commercialisation is now getting closer by the day. In February 2014, almost £5 million of funding was announced by Energy Minister Fergus Ewing during the RenewableUK Wave and Tidal Conference and Exhibition in Belfast for two initiatives.

Mr Ewing said five marine energy innovation projects are to benefit from a £2.8

million share of the Marine Renewables Commercialisation Fund (MRCF), while tidal power company Atlantis Resources Corporation is to receive a £2 million investment from the £103 million Renewable Energy Investment Fund to help establish a global engineering hub in Edinburgh. All great news for those who have been pioneers of this energy.

The Atlantis hub, which will become the company’s global centre of excellence is expected to create around 20 jobs once operational. The MRCF grant funding is critical to facilitating the success of the first wave and tidal arrays in Scotland, while reducing the cost and risk of the technology.

The funding will help build Scotland’s marine energy industry, bringing important socioeconomic benefits to remote and coastal areas

of Scotland.

Initiatives benefiting from the funding include work for construction firm McLauglin & Harvey, along with SeaRoc and Nautricity, to fund the foundation system which will be used for Nautricity’s 500 kilowatt turbine off the Mull of Kintyre; while the European Marine Energy Centre in Orkney will design and build a seabed monitoring pod.

There is also work for Green Theme to develop a cable-mounted device called ‘CableFish’ that includes a camera and GPS to helps with cable installation in fast flowing conditions, while marine data experts Partrac, along with partners, are to carry out surveys at two Scottish sites to understand turbulence in tidal flows.

With the elements buffeting these massive structures, engineering company Tension

>> How Does It Work?

Tidal stream generators TSGs make use of the kinetic energy of moving water to power turbines, in a similar way to wind turbines that use moving air. This method has the lower cost and lower ecological impact compared to tidal barrages.

Tidal barrage Tidal barrages make use of the potential energy in the difference in height (or head) between high and low tides. Barrages are essentially dams across the full width of a tidal estuary, and suffer from very high civil infrastructure costs, a worldwide shortage of viable sites and environmental issues.

Dynamic tidal power (DTP) Dynamic tidal power it is a theoretical generation technology that would exploit an interaction between potential and kinetic energies in tidal flows. It proposes that very long dams (for example: 30–50 km length) be built from coasts straight out into the sea or ocean, without enclosing an area. Tidal phase differences are introduced by the dam,

BUSINESS QUARTER | SPRING 14

leading to a significant water level differential (at least 2–3 meters) in shallow coastal seas featuring strong coast-parallel oscillating tidal currents. Each dam would generate power at a scale of 6-15 GW. Wave Energy Waves are formed by winds blowing over the surface of the sea.

The size of the waves generated will depend upon the wind speed, its duration, the distance of water over which it blows (the fetch), bathymetry of the seafloor (which can focus or disperse the energy of the waves) and currents. The resultant movement of water carries kinetic energy which can be harnessed by wave energy devices.

Tidal Energy Tidal streams are created by the constantly changing gravitational pull of the Moon and Sun on the world’s oceans. Tidal stream technologies capture the kinetic energy of the currents flowing in and out of the tidal areas. Since the relative positions of the Sun and Moon can be predicted with complete accuracy, so can the resultant tide. It is this predictability that makes tidal energy such a valuable resource.

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SPRING 14

Technology International and partners are to design a novel mooring system that can be used for wave and tidal arrays.

“Scotland is at the forefront of developing offshore and low carbon energy generation technology with some of the world’s greatest wind, wave and tidal resources heavily concentrated in the waters around our country,” said Mr Ewing.

The Scottish Government is committed to the development of a successful marinerenewable energy industry in Scotland as part of achieving the European Union 2020 target: 20% of EU’s energy consumption from renewable sources by 2020. A stated target is meeting 100% of Scotland’s electricity demand from renewable sources by 2020. That’s only six years away.

Scottish Power Renewables, Aquamarine Power, Pelamis Wave Power and MeyGen are

ON THE RECORD

all attempting to produce large-scale electricity using the power of the sea.

Several companies are well advanced, including MeyGen’s tidal energy project in the Pentland Firth that will initially consist of six tidal turbines, Pelamis’ wave power device at Farr Point will use the motion of waves to generate electricity, Aquamarine’s Oyster wave energy converter is to be deployed off the Isle of Lewis and Scottish Power Renewables hopes to create a tidal energy project off the north coast of Caithness Meanwhile Rolls-Royce have a 500 kW tidal stream plant, a type of tidal turbine that is operational at a test facility, 40 meters deep off the coast of Scotland. And supply chains are set to benefit too in terms of equipment transportation, offshore site preparation, device positioning and

connection. The largest items of expenditure including the structure, mechanical plant (hydraulics and turbines), electrical plant (generators and switch gear), vessels, foundations and moorings are still being designed and tested. n

Scotland is at the forefront of developing offshore technology

International trade continues to present an opportunity for Scotland to bring immediate and sustainable growth to its economy.

Join us to celebrate entrepreneurial endeavour and encourage fledgling exporters.

SCOTTISH

EXPORT AWARDS

2014 Wednesday 28 May 2014

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BUSINESS QUARTER | SPRING 14

ON THE RECORD

SPRING 14

>> Travels with a jam jar The entrepreneur Fraser Doherty featured in our first edition of BQ Scotland.

Iain Clark caught up with the 24-year-old to see how life has progressed for the SuperJam man business, you don’t require a boardroom and vast office space. Instead, Fraser has his laptop, smartphone and a few essential items of clothing.

“It’s a little bit of an experiment really, I don’t have a house or a car or anything like that. I’m travelling 365 days a year, constantly on the move. I want to prove that you can live and work anywhere. Technology today makes it possible to run your company from wherever you are,” he says.

“I love going to other countries and going into supermarkets there and finding out what the food trends are like, what the packaging is like. It’s just finding ideas which I can bring back home.”

Doherty’s SuperJam business, which he created in the kitchen of his Edinburgh home from his grandmother’s jam recipes, has come a long way since its launch in Waitrose in 2007.

Doherty’s Jam products are now stacked on

I want to prove that you can live and work anywhere

BQ Scotland is preparing for its inaugural Export Awards in May, with over 25 brilliant Scottish businesses shortlisted and featured in our sister publication BQ2. The awards, in the Glasgow Science Centre, are supported by Scottish Enterprise.

So it seemed a smart idea to catch up with Fraser Doherty, the young Scot who we

BUSINESS QUARTER | SPRING 14

featured in our first BQ Scotland, and hear about his exporting adventures. He has visited over 50 countries in the past three years, spreading the message about his business and learning about entrepreneurship in different areas around the world.

Doherty travels light. The Scottish entrepreneur is trying to prove that to be successful in

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shelves around the world.

The product is in over 200 stores in Australia, over 100 in South Korea and will launch in the United States and Japan in 2014. The 25-year-old Scot has taken his jam from the family kitchen in Edinburgh to South Korea, a country in which bread and scones are a foreign concept.

SPRING 14

“There are three people working on SuperJam Korea and they’re taking the brand and changing it a little bit to appeal to the South Korean consumer. Bread is a new thing over there and it’s growing really fast so we’re concentrating on bakeries over there at the moment as a luxury gift, selling at around £6 per jar.”

As well as his various jam products, Doherty has plans to expand his range of condiments into chocolate spreads and peanut butter products in 2014. He also sells SuperHoney, a project involving local communities across the UK, donating hives to local community groups who then teach local kids how to make honey.

“The whole philosophy is to create a great product which does really well, makes money but also to give something back and do good.

We’re teaching kids how to make honey. We are promoting bee-keeping as bees are having

ON THE RECORD

a bit of a hard time at the moment. The bee population in the UK has declined by 50% in recent years due to intensive farming, yet we need bees to pollenate our flowers. So we sell honey with money going back into apiary conservation and development.”

Visiting over 50 countries, Doherty’s story has been well told to budding entrepreneurs around the world and the 25-year-old believes that being a Scot helps in selling his product around the world.

“When I was in China I did some school visits in eight different cities, half of which I hadn’t heard of, but when I told people I’m from Scotland the majority of them could relate to that. When you’re trying to sell a food product, being from Scotland immediately has a value.”

Doherty’s inbox fills up with emails and questions and ideas from other budding entrepreneurs, seeking advice on starting up

new businesses. He remembers being in their position only a few years ago and endeavours to answer all questions and provide any advice he can.

“The problem with entrepreneurs is you come up with hundreds of ideas every week and the hard part is trying not to be a magpie and trying to focus on hundreds of things,” says Doherty. “There’s a lot to be said for focus. If I can be the best person in the world at putting sweet things in jars then that’s great. The world is so noisy and people struggle to focus on one thing but if you can, I believe you can make a success out of anything.”

What’s the young SuperJam man’s advice to Scottish budding entrepreneurs? “Think big.

Come up with something which you think will appeal to people all over the world, or you can adapt to appeal to everyone, that’s the world we live in now.” n

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BUSINESS QUARTER | SPRING 14

NEWS

SPRING 14

Entrepreneur aims to open floodgates for water company, management team benefits from recruitment firm changes, aviation arm of business takes off, oil and gas contractor lands lucrative Oman deal

>> BrewDog sniffs out another opportunity Scotland’s largest independent brewery, BrewDog has opened BrewDog Sheffield, its 13th craft beer bar in the UK and 16th worldwide. Situated at 108-110 Devonshire Street, the new bar is BrewDog’s third launch of 2014, following openings in São Paulo, Brazil and Tokyo.

BrewDog Sheffield is the second bar to be opened in Yorkshire by the brewery, following the launch of a Leeds bar last year.

>> Clearly a good idea

>> Strong foundations

Entrepreneur John Wyllie has teamed up with Thames Water in a bid to open up the Scottish water market. The Paisley-born dealmaker will act as an intermediary between Thames Water Commercial Services; part of the £1.8 billion turnover Thames Water Group, and Scottish enterprises who presently take water and waste service from Business Stream.

When the Scottish water market was opened up in 2008, Scottish Water separated into a retail and a wholesale arm.

The retail arm, called Business Stream, supplies 97% of the 157,000 companies in Scotland.

It is this market which Thames Water is keen to penetrate.

Way2Market Ltd, trading as Water24, will be able to utilise Thames Water’s experience and capability to guarantee cost savings to all Scottish enterprises. Wyllie, who will be interim Managing Director of Water24, said: “This is a ground-breaking deal which will have major implications for the way all Scottish companies access their utility requirements. It will bring competition to a market which has lacked it for the past five years.

Kier Group plc, a leading UK construction, services and property group, and the parent company of Kier Construction in Scotland, has delivered its interim management statement for the six months to 31 December 2013.

The performance echoes Kier’s continued growth in Scotland, and the north-east of England with offices in Glasgow, Aberdeen and Newcastle.

Brian McQuade, managing director of the Scottish and north-east England arm of Kier’s Construction division, said: “The outlook for the construction sector is looking increasingly optimistic and this is mirrored in our own business where we are shaping up for sustainable growth this year. We have secured significant new contracts in Scotland in recent months and have a strong order book and a healthy cash balance.”

Kier Construction is one of the five principal partners on Frameworks Scotland 2, the procurement initiative that will deliver £600m worth of construction projects to acute NHS facilities in Scotland over the next six years.

The company has also been appointed to

BUSINESS QUARTER | SPRING 14

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the Highlands and Islands Enterprise Property Prime Contractors Framework, appointed as an equity stakeholder in Hub SouthWest Scotland, which will deliver £400m of investment over the next decade, and appointed to carry out £63m of schools work in north-east England by the Education Funding Agency.

Kier Construction has completed an integrated campus for a mainstream primary school and support needs school at Maxwellton and Greenburn School in East Kilbride. The firms is also working on a £8m student accommodation project in Glasgow’s West End and on a £6m project for Robert Gordon’s College in Aberdeen, plus a £9.5m project to build a new extension at Robert Gordon University campus.

The outlook for construction is increasingly optimistic

>> Record year for EICC Edinburgh International Conference Centre has delivered a record £50.4m economic impact in 2013 to its host city-region. The money injected into the local economy comes from the spending power of international business tourists attending major conferences at EICC. Longer duration international events with greater delegate numbers have pushed the economic impact measure past the previous high of £35.6m in 2012.

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NEWS

SPRING 14

>> A challenging year Aggreko, the temporary power people, has announced revenues for 2013 of £1,573m, and a return of £200m of capital to shareholders, with profits before tax of £338m. The result announcement also confirms Rupert Soames to step down as chief executive after 11 successful years with Angus Cockburn, the group chief financial officer appointed interim CEO. Ken Hanna, chairman, said: “After nine consecutive years of growth, 2013 proved to be a challenging year; despite this Aggreko delivered a creditable performance and good progress on many fronts. Our Local business delivered underlying revenue growth of 7% and margins strengthened; trading in our Power Projects business was, however, more challenging, with underlying revenue at similar levels to last year and margins a little lower. As a result of a disciplined approach to capital expenditure, we generated strong cashflow and net debt reduced by £230m; I am delighted that we can announce a £200m return of cash to shareholders as well as a 10% increase in the dividend.”

He said the group has made an encouraging start to 2014. The Local business has continued to show good growth with volumes on rent currently up 7% on the prior year.

“We have recently signed a contract in Libya for 120MW which we would normally have taken into the order book. However, given the volatile situation in the country, we will not include it in order intake until we are certain we will be able to execute it. Assuming that we are able to proceed in Libya, we expect that order intake for the first quarter will be at a similar level to the final quarter of 2013.

“Off-hires in the first quarter are expected to run at a lower rate than has been the case for the last few years and our 150MW of diesel contracts in Japan have now been extended until December 2014. Whilst this is all welcome, customers in the Power Projects market continue to be cautious, and at this early stage in the year, so do we.

“Overall, since we last reported in December, the business has performed in line with our expectations,”

BUSINESS QUARTER | SPRING 14

>> Better deal for recruitment team Serial entrepreneurs Paul Atkinson and Gordon Adam have reshaped Head Resourcing (pictured above), the recruitment company they established in 2001, to give the management team a larger equity stake in the £35 million turnover company. Atkinson remains a major investor after concluding an undisclosed deal with his former partner, who has stepped aside to focus on other business interests.

“Gordon and I have been together since 1995 and as my longest standing business partner remains one of my closest colleagues. We’ve made the changes so that we can have a more focused yet flexible investment structure providing the opportunity to extend the business. It also gives our people running the show the incentives to make it work even better,” says Atkinson.

Martin Ewart, a former managing director of Logica and head of group technology at HBOS, is now chairman, with the appointment of Huw Martin, Head’s managing director; Lee Murray, deputy managing director; Anna Payne, managing director of Head Medical; onto the board which includes finance director Callum Lyle. Atkinson, the former chairman, remains as a nonexecutive director.

Huw Martin, who has been given an extended role to expand the recruitment business across the UK, said: “This is a fabulous opportunity for the business. We have plans to push past a turnover of £50 million with new geographic locations, new service offerings and further investment in our people.”

Paul and Gordon founded the IT recruitment company Direct Resources, in 1995, which was sold to NASDAQ-listed Mastech Systems Corporation for £3.4 million. During this time they launched a spin-out firm, RecruitmentScotland.com, which was sold in 2000 for £9 million to TMP Worldwide. In 2001, Paul and Gordon set up Active Executive, which was then rebranded as Head Resourcing. Head Medical, run by Anna Payne and also based in Edinburgh, make up the group.

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NEWS

SPRING 14

relationships and developed new customers internationally.”

Mr McCulloch attributes the turnaround at DEC to a sustained focus on growing the organisation. “Getting the right people involved is paramount to any successful growth strategy. Initially the task was to strengthen commercial and management processes, allowing the founding directors to focus on the technical excellence upon which the company was built.”

Mr McCulloch undertook a reengineering of the finances of DEC, addressing the legacy cash flow issues that previously beset the business, by directly investing in the company and securing additional working capital facilities.

>> Menzies Aviation flies high as magazines falter John Menzies, the aviation services and print media distribution group, broke through the £2 billion turnover in 2013, with profits of £60 million, but magazine distribution revenues have fallen. Menzies Aviation, a leading global provider of passenger, ramp and cargo services, also owns AMI, the global airfreight and express wholesaler. The Menzies Aviation business operated at 144 airports in 31 countries, with annual revenue in excess of $1.1bn and is supported by a team of around 20,000 people.

“Much progress has been made during 2013, a busy year for contract renewals and wins, in both our Aviation and Distribution businesses. We now have over 80% of our revenue streams from print media distribution underpinned with contracts which are not due for renewal until 2019, and in Aviation we have seen positive growth in contract wins with both existing customers and new customers,” says chairman Iain Napier.

Geographic diversification continues, including entry into Latin America, with three key aviation acquisitions made in the year.

“2013 has been an important year for building a strong growth platform and refocusing efforts in cost management in response to very disappointing magazine sales in the year which impacted our results,” he said.

Turnover was £2,000.3m, while underlying profit before tax fell to £53.1m (2012: £54.5m).

Profit before tax was £42.1m (2012: £28.1m). 2012 included £18.4m of non-recurring items reflecting, in the main, management actions to close cargo operations in the UK and USA which allowed the focus to be on higher margin operations which has yielded benefits in 2013.

>> Only way is up Dynamic Equipment Company, the specialist supplier to the international oil and gas exploration market, is on a strong upward sales and profits path following a management re-organisation and significant new investment. The Aberdeen-based designer and manufacturer of bespoke mechanical handling equipment will see sales rise by

BUSINESS QUARTER | SPRING 14

nearly 60% this year to £4.8 million, and by almost 70% to just over £8 million next year with 80% of turnover arising from exports.

Managing director, John McCulloch, an experienced oil industry executive who joined founding directors Richard Hay and Simon Newberry in 2011, said: “We have established a solid platform for growth.

DEC has consolidated existing customer

18

We have established a solid platform for growth. DEC has consolidated existing customer relationships and developed new customers internationally >> Drilling deal struck KCA Deutag has been awarded a five year plus options contract by BP, for the construction and operation of three new build fast moving land rigs in Oman. These will be manufactured by Bentec, KCA Deutag’s manufacturer of drilling rigs and equipment.

The contract value is in the order of $220 million USD for the initial contract, and $340 million USD including options. KCA Deutag operates seven rigs in Oman ranging from 750 to 3,000 HP. This contract represents an excellent business growth opportunity, in a country with ambitious plans to further increase its oil and gas production levels.

The specification of the new fast moving >>

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NEWS

SPRING 14

desert rigs will allow KCA Deutag over the contract duration, to demonstrate its commitment to continuous performance improvement, in both safety and drilling performance, which in turn will reduce the total drilling cost for BP. Andy Hendry, President of KCA Deutag Land division, said “BP Khazzan is a very high profile development within Oman and the broader Middle East. Given the desire for best in class

drilling efficiency and safety, we are extremely excited to be partnering with BP on this project. KCA Deutag is also looking forward to promoting local content and in-country value for Oman in the way that we work.

This is a very significant land drilling contract for KCA Deutag and I am especially proud of the many employees and functional teams that contributed to its award. Drilling will commence in quarter four of 2014.”

We are extremely excited to be partnering BP on this project

>> BQ people on the move Kenneth Shand, partner and head of its corporate department, has been elected chief executive of Maclay Murray & Spens LLP. He takes over the role from 1 June 2014, following Chris Smylie’s decision to step down.

Robert Laing, chairman of MMS, said: “I would like to take this opportunity to publicly acknowledge Chris’ outstanding contribution to the firm over his time as chief executive.

Through a period of unprecedented turbulence in the legal sector he has piloted the firm with a steady hand and has been assured and resolute in his leadership.”

Kenneth Shand said: “It is a great privilege to be elected to lead MMS. Chris’ resolve in reshaping the firm through his tenure as CEO means we are in a strong position, with tremendous potential for the future.”

MMS concluded more than £2bn worth of deals in recent months, which culminated in its lead legal advisory role in Aberdeen Asset Management’s landmark £650m acquisition of SWIP. Ian McHoul, the former finance director of Scottish & Newcastle, who departed after the sale to Heineken, has joined Britvic as a non-executive director. He is currently the chief financial offer of Amec.

Stewart Mitchell has taken over as chief executive of global offshore and mechanical handling group, Sparrows. The announcement

follows the decision of chief executive, Doug Sedge, to stand down after four and half years with the company.

Law firm Wright, Johnston & Mackenzie LLP have expanded their Private Client and Wealth Planning teams with new appointments.

Solicitors Annie Pearson and Dara Richards will work win the firm’s family business client, while Neil Burns has joined the Wealth Planning Team.

Caroline Elgar, the lettings manager at Charles White and latterly, the Lomond Capital Group, one of Edinburgh’s residential lettings experts, has joined Trinity Factors to head up their residential and commercial lettings department.

Chartered surveyors DM Hall has appointed one of the country’s foremost experts in the residential property market as its new managing partner. Eric Curran has taken over the helm from Bill Knight. Mr Curran is vice-chair of the RICS Residential Property Professional Group Board, which advises and guides surveyors on professional matters.

Bloxx, the Archangel-backed web content filtering company has appointed Mark Gibson as sales director. Mark joins from Capita and was previously sales & marketing director of Memex.

Scottish Water has appointed Alan Scott as its finance director. He joined from Balfour Beatty where he was finance director of Balfour Beatty Regional. Previously he was finance director of Miller Construction.

Johnstons of Elgin, renowned for its cashmere and fine woollens, has appointed Simon Cotton as chief executive. He joins from Swiss conglomerate Franke.

Law firm, DWF has expanded its Edinburgh real estate team with the appointment of Paul Mason. The new hire enhances DWF’s real estate and retail capability in Scotland and further boosts its 190 strong team. Paul joins from Eversheds.

Meanwhile, planning and construction lawyer, Murray Shaw, has joined Gillespie Macandrew as partner. Murray Shaw spent over 30 years with Biggart Baillie, including over 20 years as a partner, and was chairman and senior partner at the time of its merger with DWF in 2012.

Will Whitehorn – interviewed in BQ Issue 3 – has been appointed chairman of Scottish Exhibition and Conference Centre. He spent many years at Virgin Group where latterly he was president of Virgin Galactic.

He is also a non-executive director of Stagecoach Group.

If you’d like to include someone on the move, please email editor@bq-scotland.co.uk

BUSINESS QUARTER | SPRING 14

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www.bq-magazine.co.uk

ISSUE FOURTEEN: WINTER 2013

www.bq-magazine.co.uk

RULE CHANGING

Music business raises the tempo globally

SOMETHING CRAFTY

HIGHLAND CHIEFTAIN

Frothy ways to change tastes

SHOESTRING CINEMA Scots film-makers show how

LEGENDARY TRIMMER Haircutter with soul and spirit

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And it’s social investment next

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ISSUE TWELVE: SUMMER 2013

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ISSUE ELEVEN: SPRING 2013

PROFIT AND MOSS ACCOUNT

CHANGE MAKER

VOICE OF AN ANGEL

DEALS IN MOTION The inside track on Jim McColl’s route to the top

VISIONARY DEVELOPER

The cashmere queen plots her next move in retail

Charting Scotland’s growth as a land of entrepreneurs

Door is open for the right kind of deal

Water empire with a spring in its step

Investor making a difference

CLANS THAT CAN Getting family businesses over their hurdles

Long and wynding roads

FROZEN SEAS TO PEAS

HEALTHY OUTLOOK

PAR FOR THE COURSE

OUT WITH THE OLD

INNES BOOK OF RECORDS

A POINT TO PROVE

Riding the waves with an industry legend

MARXISM MASTERED

Business Quarter Magazine

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THE X-PORT FACTOR

Legal niceties that could arise

A fresh approach to recruitment in Scotland

A TIGHT-KNIT PLAN

How an IT man got his wings in angel investment

Swiss businessman Martin Velasco’s healthier world vision

The Scottish stars who’ve created emerging businesses on the back of sporting success

Amor Group tuned up for a challenge

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The dinners are being held in Scotland, the North East, Yorkshire and the West Midlands prior to MADE in September 2014.

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COMPANY PROFILE

SPRING 14

Exploring Scotland’s low carbon potential Earlier this year US energy and environmental expert Dan Reicher hosted a low carbon masterclass for Scottish businesses. Here he looks at the huge potential of Scotland’s growing clean tech industry.

SCOTTISH PROGRESS His approach to energy policy concentrates on what he calls three sides of a triangle: policy, technology and finance.

“It strikes me that Scotland is in fact making progress on all three points on the triangle, particularly focused on some of the larger clean energy opportunities, some of which are quite compelling.

On Scotland’s experience of these emerging industries he says, “The offshore wind resource is vast and both the national and private sector commitment to developing it is very large.

“I think it is a smart area for Scotland to be pursuing and it also seems to me the marine technologies [are] looking promising and there are some biomass opportunities.”

Dan believes that Scotland has the potential to build its renewable energy manufacturing base and that our experience of the oil and gas industry can help.

“Offshore wind is still a relatively young technology and the competition is still sorting itself out.

“There are lots of examples of even more mature pieces of the energy industry, where the competitive landscape is still not settling, so I think in no way should Scotland count itself out.

“One of the things that strikes me as I look through the situation in Scotland is that a fairly strong oil and gas sector could bring a lot to offshore wind and I see that as a real advantage through increasing interest and expertise in going offshore and going deep for example.

“That is a natural bridge to offshore wind and potentially quite a compelling bridge to floating offshore wind, rather than fixed ones. If you have to put a floating offshore facility in 1000 metres of water, then the oil companies could bring expertise.

DOMESTIC TECH CAN BUILD INTERNATIONAL OPPORTUNITIES Dan also notes that Scotland’s growing low

BUSINESS QUARTER | SPRING 14

carbon economy can bring international as well as domestic benefits, “There are reasons China has turned to developing its own domestic solar resource, one of which is developing a domestic resource gives you strength all through the value chain.

“The more you deploy it in your own country then the more likely you are to be a leader in the overall technology value chain.”

At home, Dan has watched investment in clean technology drop off in the US in recent years - and notes that investors need to have patience and commitment for projects to succeed: “Cleantech has much longer development time frames and generally requires much larger amounts of capital.

“I saw this very much evident at Google, where it was amazing to me how quickly information technologies were invented and deployed. With the deployment of advanced energy technologies we often measure them in decades and multiple billions of dollars.”

And opportunities are growing for Scottish firms with some US venture firms increasingly taking a

22

Dan Reicher

global view, particularly in areas like energy storage and smart grid technologies, “There is some very important and attractive aspects to being able to better store electricity. We are not very advanced anywhere in the world at that as batteries have a long way to go, pump hydro is not providing the kind of capacity we need at the cost we need it to be.

“It is quite a hot race among storage companies and it has this compelling intersection with the world of the electric vehicle.

“The rise of plug-in automobiles

SPRING 14

COMPANY PROFILE

SUSTAINABLE INNOVATION FOR INNIS & GUNN When Edinburgh-based brewer Innis & Gunn needed to replace the moulds for their bottles, they challenged their designers to come up with a sustainable solution.

Dougal Sharp, Innis & Gunn’s founder and CEO, says: “Innovation has always been at the heart of our business. The moulds for our distinctive glass bottles had come to the end of their lives and needed replacing. Sustainability is something I strongly believe in.

It’s not as simple as saying ‘ok, let’s have some lightweight glass.’ It involves our label and all of our packaging had to be redesigned. It’s a big and complex project.

“So I asked our glass manufacturer if it was possible to reduce the weight and therefore the environmental impact of our bottles.

“We didn’t want to lose any visual impact. We have the lettering in the glass of the bottle and a very particular bottle shape.”

The new design took 60 grams out of the 330ml bottle and 80 grams from the 660ml bottle. That equates to saving 2000 tonnes of CO2, cutting 30,000 road miles a year and using 10% fewer shipping containers.

Dougal Sharp recognised the benefits immediately: “I was absolutely amazed. This was a huge amount of weight. And only the trained eye could spot the difference. We would never have done it if it had in any way compromised the appearance of the product.

“The impact is absolutely massive and for a change that no one really notices. When you consider that, the only thing you can really ask is why wouldn’t you do it?”

A CARBON FRIENDLY MOVE Innis & Gunn also managed to reduce their carbon footprint by moving their bottling operation to the Wellpark Brewery in Glasgow, next to their brewing operation: “Moving our bottling operation to the Wellpark Brewery in Glasgow was in part about cutting back the number of road miles. We were bottling down in Bury St Edmonds and so obviously the road freight element of this was not ideal. And to have a bottling plant so far away is not ideal from a management control perspective.

“We are always looking for other ways to reduce our material use and looking to reduce what we use from a materials and energy perspective. It’s an ongoing process that we are committed to as a business.”

INTERNATIONAL SUCCESS Today the company produces the top selling imported beers in Sweden and the top selling British bottled beer in Canada.

“We are really only in three international markets outside the UK: Sweden, Canada and the US. Our ambition in those markets has always been to grow businesses of scale, instead of having lots of small markets.”

“Our business is absolutely focused on customer service on getting to know and understand the consumer and having meaningful value generating relationships with our customers.

In tackling the challenges of sustainability and international trade, Innis & Gunn have been helped by Scottish Enterprise: “Our Scottish Enterprise sustainability support adviser came in and talked to our teams about the lightweight project.

“In terms of our international development our relationship with Scottish Enterprise is very important. We always talk to them about what we’re thinking and what projects are coming up because you just never know where they might have a person with relevant knowledge regarding a market or event or facilitating a meeting or something like that.

“As with all relationships they are only ever as good as what you put in to them.”

In terms of our international development our relationship with Scottish Enterprise is very important

23

has caused a much more intensive focus on batteries than we had seen previously. If we were to get to the point where there were a larger number of plug in vehicles on the road, there are all sorts of interesting opportunities to provide storage for renewable generated electricity in those vehicles.

“If you had a plug-in vehicle fleet which numbered in the millions, you can imagine a situation where in a sense you filled those cars up at night with cheaper electricity.

“Then through a smart grid, you can imagine a situation where those vehicles might in fact be

One of the things that strikes me as I look through the situation in Scotland is that a fairly strong oil and gas sector could bring a lot to offshore wind able to provide electricity from their batteries back [to the grid] the next day, for example while plugged in at work.”

How should Scottish businesses approach the low carbon sector? “It is a combination of expertise, timing and a bit of good luck. All of that has got to be with an eye towards those three fundamental pieces of the sustainable technology triangle.

“Too often, we see folks with really smart technical ideas that have trouble navigating the worlds of policy and finance.”

Dan Reicher has been an adviser to three US presidents, a Google executive and is now Executive Director at Stanford University’s SteyerTaylor Center for Energy Policy and Finance.

As such he is globally recognised as a leading expert on low carbon economics and renewable energy policy.

Find out more about the support Scottish Enterprise can offer your business in this area at www.scottish-enterprise.com/lowcarbon

BUSINESS QUARTER | SPRING 14

AS I SEE IT

SPRING 14

It’s in everyone’s interest to get a grip of this scandal

BUSINESS QUARTER | SPRING 14

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SPRING 14

AS I SEE IT

We are at a pivotal moment for the hundreds of SMEs blighted by the mis-selling of interest rate hedging products, says Scott Cowan, of Glasgow-based Veritas Treasury The interest rate swaps mis-selling scandal that has engulfed tens of thousands of UK small and medium sized (SME) businesses is entering a crucial phase as the end of the formal Financial Conduct Authority (FCA) Review process approaches.

As banks seek to wrap up compensation cases by the FCA-imposed deadline of the end of May, significant worries remain for SMEs - not only for those still embroiled in efforts to seek bank compensation but for those unjustly excluded from the FCA review on a ‘technicality.’

With what may be the final act of the compensation battle just months away, banks have paid out only a tiny fraction of the £3.75 billion set aside to compensate SMEs for missold swaps. For Royal Bank of Scotland alone

partnering with Frenkels Forensic Accountants.

Our recent debate, chaired by broadcaster Andrew Neil and attended by members of the Treasury Select Committee and other leading politicians and business representatives, provided a much-needed opportunity for SMEs to have their say and to have direct input into devising solutions to a pernicious problem that is far from over.

Interest rate hedging products were designed to protect smaller companies against rising interest rates and many small businesses purchased swaps on the advice of their banks.

Few completely understood the complex nature of the derivatives products they had purchased, nor the implications of being locked into toxic long-term contracts.

The onset of the global financial crisis in 2008

Few understood the complex nature of the derivatives products they had purchased, nor the implications of being locked into toxic long-term contracts (which has the largest number of mis-sold swaps cases) there are more than 9,000 cases outstanding - they need to resolve one case every five minutes to meet the FCA deadline.

This is a pivotal moment for SMEs blighted by one of the worst financial scandals in recent history. We urgently need to stimulate a rigorous debate among policy-makers, bankers, professional advisers and the business community to generate fresh ideas for policy shifts and measures which can help more SMEs secure redress for mis-sold swaps.

Veritas has been involved in the successful resolution of a number of interest rate swap misselling cases and we have been

fundamentally changed the outlook for interest rates, leaving SMEs trapped in swaps contracts with punitively high interest rates and no realistic option of escape as many contained ‘break clauses’ running into tens of thousands of pounds.

When the global financial crisis broke, interest rates were at 5%, just five months later they plummeted to a historic low of 0.5%.

Businesses caught in the swaps trap as rates fell, included plumbing and heating contractors to farmers, hoteliers, publicans, care homes, funeral directors and property developers.

There is a particular inequity for SMEs that purchased swaps which were embedded in tailored

25

loan agreements in that period as these were deemed to be outwith the terms of the FCA review. Experts estimate that if these swaps were included in the final reckoning, it would amount to a staggering 100,000 cases overall.

Many Scottish SMEs who took out tailored loans with Clydesdale Bank are among those excluded from the FCA review. There are political moves to have these products included within the review and compensation scheme but it is far from certain whether there is sufficient political will and clout to transform this aspiration into a reality.

Businesses deemed ‘sophisticated’ investors on the basis of meeting an (arguably) arbitrarily chosen threshold regarding turnover or number of employees, are also still in limbo concerning swaps compensation. Their situation should be revisited as a matter of urgency. The complex and controversial issue of consequential loss has also yet to be fully addressed, causing additional anxiety for SMEs coping with the ripple effects of mis-sold swaps.

These issues may seem esoteric but for the thousands of often relatively small family businesses affected by them, pursuing swaps compensation can be confusing and stressful. It is best done with the assistance of an expert adviser who is well-versed in derivatives products as well as the regulatory and compliance framework, enabling them to accurately identify mis-selling and construct a watertight case for compensation.

SMEs are the lifeblood of the economy, generating much-needed employment, exports and tax revenues, yet, at a time when they should be positioning themselves to take advantage of the nascent UK economic recovery, thousands still have to expend finite resources of energy and time on pursuing compensation for swaps products they purchased years ago. n For more information visit: Veritastreasury.com website.

BUSINESS QUARTER | SPRING 14

ENTREPRENEUR

SPRING 14

A home-spun yarn from the castle

BUSINESS QUARTER | SPRING 14

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SPRING 14

ENTREPRENEUR

Sir Jack Stewart-Clark is the owner of Dundas Castle, one of the most perfect places for a wedding or corporate leisure day in Scotland.

However, Sir Jack had a distinguished career in business and politics before restoring his historic home into an intimate hospitality venue with five-star service. He talks to BQ Scotland editor Kenny Kemp about his life and times Here’s a bit of history. The siege and bombardment of Edinburgh Castle by Oliver Cromwell ended on 24 December 1650 when its governor Walter Dundas eventually surrendered. Dundas, who had been a Covenanter, decided to join Cromwell’s Commonwealth side. Today, many Scottish couples who celebrate their wedding vows in the ancient Old Keep of Dundas Castle have cause to be grateful for Walter’s submission.

For Walter Dundas’s own home was spared the wrath of Cromwell and today the 15th century Keep is now one of the most atmospheric places to tie the marital knot. It’s a restored tower with a vaulted medieval great hall, steeped in Caledonian history. It’s where Cromwell once stayed during his period of religious warfare in Scotland which saw similar strongholds razed to the ground.

The Auld Keep, built in 1416, and the more comfortable adjoining country house built in 1818 by architect William Burn – with its manicured acres – is the home of Sir Jack Stewart-Clark and his Dutch-born wife, Lady Lydia. Dundas Castle is one of the great success stories of up-market tourism and leisure in Scotland and a credit to the vision of Sir Jack.

Sir Jack had several remarkable careers even before undertaking the rebuilding of Dundas Castle as this five-star venue, with its glorious backdrop overlooking the Firth OF Forth.

After many years working abroad with thread maker J&P Coats in Uruguay, Canada, Spain, Holland, Portugal and Pakistan, the fluent Dutch and Spanish speaker rose to the top of the Philips electrical conglomerate in the UK. Firstly, he became managing director of Philips Electical, the consumer goods arm of Philips in the UK and then managing director of Pye of Cambridge, a public company but majority

owned by Philips. He stepped out of business in 1979 to become one of the UK’s first elected European parliamentarians and rose to become vice president of the European Parliament. He’s an active octogenarian with a sharp-as-tack memory and remains a strong pro-European.

He returned to Dundas in 1997 armed with 27 years of business and 20 years of political experience.

While he has built Dundas Castle’s corporate, leisure and wedding business from scratch, it is Sir Jack’s personal touch which chimes so well with guests. He puts much of the success down to his staff, working to ensure that demanding high-value events go off seamlessly. But the Stewart-Clark family presence is an essential aspect of Dundas’s intimate charm and this is due in no small measure to Sir Jack’s wife Lady Lydia, who has done all the interior decorating in Dundas and has turned it into “the cosiest castle in Scotland”.

“The leisure business has a reputation for quick turnover of staff, bigger than almost any other industry. I wanted to be absolutely certain that I looked after our people and ensure that they would stay with us for many years. Not only are they paid reasonably well in comparison to the rest of the sector, but they have jobs they enjoy doing and become part of our extended family,” he says.

It has worked. Lucy Scillitoe, the general manager, has been with Sir Jack for more than 10 years, while the rest of the team, including marketing manager Siobhan Leith, has been together for a long time.

“It’s so important: you’ve got to look after the people who are looking after the customers,” he says. “In that way we can expect to provide a first class attentive and caring service”.

Dundas Castle employs 20 full-time and

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another ten regular contract people, including the gardeners who keep the grounds looking in tip-top condition for over 130 events a year.

“My principle is that the moment that you come through the gates of the Castle and head up the driveway, you’ve got to feel that this is a special place that is cared for and looked after.”

He’s right. The rhododendron bushes are neatly clipped and the tarmac without a pothole – a rather rare occurrence in the environs of Edinburgh. The drive ends as you crunch onto specially imported gravel at the castle’s elegant and imposing front door. “It has all got to be kept to the highest standard. Even the brass on the front door has to be buffed and polished.”

With its grand wood-panelled entrance hall, its comfy sitting rooms and grand dining room, Dundas is a magical place for a wedding and a secluded venue for corporate customers. It has 17 luxurious bedrooms and bathrooms for overnight guests. There’s a fixed pavilion marquee beside the lawns for bigger events of up to 250 and a site for a grand marquee, which will then house up to 1,000 people.

It wasn’t always like this at Dundas. When Sir Jack and his wife started on the restoration work, the house was riddled with dry rot and required a fortune being spent to bring it into watertight condition. Also the boat house on the loch, which is now used for honeymoon night, had been vandalised.

“I feel sorry for my parents in some way.

My grandmother lived here until 1938 with her unmarried children. My parents moved into Dundas after she died. However shortly, thereafter, the RAF requisitioned the Castle and my parents moved to Ravelston in Edinburgh for the duration of the war.

Sir Jack’s father, Sir Stewart, died when he was 68. He had been a great sportsman >>

BUSINESS QUARTER | SPRING 14

ENTREPRENEUR who played squash for Scotland and tennis for the East of Scotland but, according to Sir Jack, had little business acumen. His brother, Dudley had joined J&P Coats a few years before the outbreak of war. He loved flying and joined the RAF as an early member of the famous 603 Squadron in Edinburgh. He flew Spitfires, shot down several Luftwaffe planes but was eventually shot down and killed over France.

Sir Jack’s parents moved back to the estate in 1947 but it was an enormous place to run and the main house was sub-let into individual flats.

Sir Jack’s mother, Jane, lived on her own in one of the wings for 23 years and she passed away in 1993, aged 89. It was only then that the refurbishment began.

“The place had become down-at-heel, the roofs were leaking and the gutters were not being attended to. The courtyard roof was falling in. It cost me £27,000 just to restore the rafters above our main bedroom corridor because of dry rot. It was a mega-operation and we had to do it bit by bit. Something new every year to bring it to its current level.

I borrowed money to help me do it up. But we got there and we got it right. It was an enormous risk but I was comforted by the maxim that whatever you do in life, you’ve got to have an exit strategy. I knew if I restored Dundas Castle, we would always get our money back if we sold it.”

Sir Jack was born in 1929. He had his early education in Edinburgh and then at Loch Rannoch. He was then packed off to Eton. In early 1948, aged 18, he was called up to the Coldstream Guards and headed to the Guards Depot in Caterham where he had four months of square-bashing. After officer cadet training he was due to be sent with 2nd Battalion Coldstream Guards to Malaya, but he broke his ankle during late-night manoeuvres and missed his posting. Instead, he went to Aldershot and then, as an Ensign (Second Lieutenant), took a platoon of Guardsmen on the SS Empire Trooper ending up in Tripolitania, now Libya.

He spent a year in the deserts of North Africa before going to Bailliol College – the Scottish college – at Oxford, where his room-mate, Sir Patrick Mayhew, who was a later Secretary of State for Northern Ireland.

“Patrick was deeply into politics, the Oxford Union and the speeches of Winston Churchill.

BUSINESS QUARTER | SPRING 14

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But I was enjoying myself too much. I was interested in the company of pretty girls and going to Ascot and that sort of stuff. The extraordinary thing was many years later during the time I was a member of the European Parliament my boundaries were changed, and the Westminster constituency of Tunbridge Wells became part of my Euro constituency.

The MP was none other than my friend Patrick Mayhew! We came together as MP and MEP after all these years.”

Sir Jack spent three years studying PPE and then History at Oxford with tutors such as Marcus Dick, Sammy Finer and Bill Williams, who as Brigadier Edgar Williams had been the chief intelligence officer with General Montgomery at El Alamein. [“I might not have been the brightest undergraduate to enter Balliol but I had a solid connection with Bill because I had been a young soldier in North Africa.”]

Sir Jack’s family fortunes are tied to the great Scottish sewing thread business of J&P Coats, which amalgamated with Clark & Sons at the beginning of the last century. During the Napoleonic War, Sir Jack’s great greatgrandfather and brother set up a threadmaking business in Paisley. With a blockade on exported German silk thread, the brothers spun and twisted long staple American cotton into sewing thread. By good fortune this new product became much more popular with seamstresses, who found the thread kinder on their fingers than silk. The next generation of Clark brothers moved from the Seedhill mills in Paisley to the newly built and now famous red-brick Anchor Mills. They also were great entrepreneurs, putting thread onto a bobbin rather than skeins and then they devised the wooden reel of cotton, which ws sold as Clark’s Penny Reel.

The progress of the Clark family continued and the next generation, of five brothers, which

included Sir Jack’s great grandfather Stewart moved to the Mile End mill and then went on to build the Atlantic and Pacific mills. The Clark sewing thread operation had now grown into a world wide concern. However, there was another thread business successfully operating at the other end of Paisley. This was owned and directed by James and Peter Coats. It took a brilliant German called Otto Ernst Philippi to persuade the two rival firms to join forces. In 1889 he set up a single worldwide operation, which sold both the products of Coats and Clark. It was called the Central Agency and was based in Glasgow. This was, perhaps inevitably followed by a merger of Coats and Clarks, together with two English sewing thread manufacturers called Brook and Chadwick in 1896. The company was called J&P Coats in Britain and Coats and Clark in the United States where the Clark brothers had established a dominant position in the thread industry. The combined Coats’ market capital rose from £2 million in 1889 to £5.5m in 1896 and to £10m in the years before the First World War. It was a highly profitable Scottish business becoming the largest manufacturing business in the UK by 1919. Against this weight of family history, Sir Jack joined J&P Coats in 1953. During training, he was sent to the company’s sales depot in Manchester and Leicester prior to his first postings abroad in Uruguay, Canada and Spain.

At the conclusion of his Spanish assignment he returned to Head Office in Glasgow.

He was sent for by the Chairman Robin Laidlaw who said to him. ‘Would you be prepared to serve for 20 years in one country for this firm?’

Young Jack’s answer after a minute or two’s thought was a definite ‘No, chairman.’ The chairman replied frostily: ‘In that case, that will be all’.

In a paternal conglomerate such as Coats, this was the wrong answer. However it seems that Sir Jack had friends at court and six months

My principle is that the moment that you come through the gates of the Castle you’ve got to feel that this is a special place that is cared for and looked after

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later he was sent to Holland as the district sales manager of the Coats Dutch subsidiary Carp Garen Fabrieken. This proved to be fortuitous because he met his Dutch wife Lydia, who was then studying pianoforte in the Amsterdam Conservatoire. She was the fourth of eight children in a family forced out of their home by the Nazis and rehoused in Eindhoven, after a Jewish family had been sent to the concentration camps.

Sir Jack’s first job after his marriage was European Sales Manager for a new product which was to be manufactured in Holland by ICI’s Lightening Zip Fastener division whose products were sold worldwide. This was the Nylozip, a forerunner of the modern synthetic zip fastening. It was to be made in Holland on the premises of JA Carp Garen Fabrieken but it proved to be an unmitigated disaster.

“I was responsible for marketing across Europe.

But the product was faulty and not tested properly. We had ghastly situations such as where a bride would go to the altar and kneel down and then ping! The back of her dress would rip open in front of the guests. The product bombed and ICI closed the factory. My own job had ceased to exist.”

Sir Jack’s great grandfather had been a Member of Parliament for Paisley and he toyed

ENTREPRENEUR

with the idea of becoming an MP himself. He applied, was selected and then stood for North Aberdeen as a Conservative & Unionist in 1959.

It was a Labour stronghold and he was soundly beaten, even though Harold Macmillan was returned as Conservative Prime Minister, with 31 Tory MPs north of the Border.

“I fought the seat because I couldn’t win and I did not want to jepardise my business prospects with J&P Coates. But I also knew that it was an opportunity to earn my political spurs which would stand me in good stead one day in the future. Then Sir Malcolm MacDougall, who had become the new chairman of Coats, spoke to me and said: ‘You’ve got to make up your mind, you either have a political career or a business career. You can’t have both. He was right.”

Politics, for the time being, were out of the way. Jack was then sent to Coats & Clark at Oporto in Portugal with his wife and baby daughter. Sales started increasing dramatically [‘It wasn’t too hard, my predecessor had been very rather laid-back.’] so that nine months after having arrived in Portugal he was called back to Head Office in Glasgow and told he was going to become the youngest country managing director in the group, with a posting to Pakistan in 1961. He was just 32 year old.

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“When I got back to Oporto Lydia and I got out the atlas and identified where Karachi was.

We were there for six years and it was the best thing that ever happened to me in business. It was a hardship post and it opened our eyes.

Every time I come out of Dundas Castle I count my blessing that I am one of the luckiest people alive. I say that because I lived for six years in a country in which millions of people are living in deep levels of poverty. During the period from 1961 to 1967, when we were living in Karachi, the country was split into East and West Pakistan, now Bangladesh; I had to visit our customers all over both parts of the country. In addition we had a factory with 200 workers. It was fascinating. I learned more about human nature and business than anywhere else,” he says.

His reward for his Asian service was being sent back to Holland as the £4,000-a-year managing director of J.A Carp’s Garen Fabrieken. He found that his previous boss, Wim Daub, the general sales manager was now reporting to him. Fortunately they had a good respect for one another and all was well. However, recession in the textile industry brought about consolidation within Coats and Sir Jack was involved in a closure programme, while still keeping people motivated. He learned the >>

BUSINESS QUARTER | SPRING 14

ENTREPRENEUR importance of open communication, keeping the Dutch textile union chief up to speed with plans and speaking regularly to the Ondernemingsraad, the works council.

When he announced the closure of the plant, he was able to obtain the understanding of the unions who agreed to the redundancy terms for his 300 employes. When the factory closed, he was presented with a silver-plated cigarette box.

“I was close to tears. They were losing their jobs yet they gave me this engraved present,” he recalls.

Coats had recently acquired Jaeger the fashion company. Sir Jack was told that it was the intention of the directors to send him to work alongside the extrovert boss of the company Geoffrey Gilbert in London on £5,000 a year. However, destiny played its role once again when Sir Jack received a telephone call asking him to meet the Chairman of Philips, Frits Philips at the group’s head office in Eindhoven. Mr Philips offered him the position of managing director of Philips Electrical Ltd, the group’s consumer arm in the UK at a salary of £9,000, with nine months training including a three-month spell at the Harvard Business School’s Advanced Management Programme.

On his course was the NASA astronaut Frank Borman, who was later chief executive of Eastern Air Lines. Sir Jack would be a senior manager in an organisation with 600,000 employees around the globe. He consulted his wife’s uncle, John Loudon, at that time the senior managing director with Royal Dutch Shell in Holland, who said that it was a once in a lifetime offer, which he could not refuse.

It would prove to be a fantastic career move.

So Sir Jack took the plunge and accepted the Philips offer much to the chagrin of Coats.

Philips Industries in the UK employed 60,000 people of which Philips Electrical had 6,000 staff and workers making and selling lighting products, television sets, radios, car radios, Philishave and other small domestic appliances and white goods with factories in Dunfermline, Hamilton, Durham and Croydon. Sir Jack and his family moved to Sussex and he took up his new responsibility in London. He chaired and worked with a UK committee of three: the managing director (himself) who was in effect the commercial director, the technical

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director and the financial director. Each of these reported separately up to their equivalents on the UK holding board who in turn reported up to their equivalents on the main Philips board in Eindhoven. It was a structure unique only to Philips. On his first day at the office, the technical director Hans Goozezijl marched into Sir Jack’s office and said “Jack, I’m in charge of manufacturing. If you want to visit my factories, you will have to ask my permission.” Sir Jack smiled disarmingly and replied that he thought it important that the technical director ought also to know the commercial side. “I hope you will share with me some of our commercial opportunities over the forthcoming years. My office is open at all times and you will always be welcome.”

The two become very firm friends working closely together and seeing each other regularly with their wives outside the business.

Sir Jack even took Hans as his passenger in his 1904 Peugeot on the London to Brighton veteran rally.

“Life is full of surprises. My boss in the UK was

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a Mr Engels. He was chairman and managing director of the holdings board for Philips in the UK. He was solid and dour. He retired soon after I took over the reins at Philips Electrical and his place was taken by a very ambitious Dutchman called Wisse Dekker. Prior to coming to London he had been head of the operations in Japan.”

Sir Jack and Dekker, who later became CEO of Philips worldwide from 1982-1986, hit it off. Philips was the first manufacturer to bring the video cassette recorder to the market, with its N1500.

“I launched it onto the UK market. It was a flop because it was brought out too quickly.

Three years later we brought out a much better model, but it was too late. There was the Betamax, of Sony, and the VCR system of Matsushita, with Philips an also-ran.

Nevertheless, I had launched the first video recorder onto the British market. I always remember the razzamatazz at the time of its introduction.”

Sir Jack’s career gives a remarkable insight into

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the machinations of European conglomerates.

Philips had been struggling to sell enough television sets to meet the mushrooming demand but Sir Jack and his team managed to carve out a major market share, despite the tide of Japanese imports. As a result the sales and profits of Philips Electrical soared and Sir Jack was seen as a sort of golden boy. After four and a half years, Dekker asked him to help revive Pye of Cambridge, now 68% owned

by Philips and a listed UK public company. He was given a nod and a wink that all would be well, this would lead to him being given the top Philips job in the UK. Pye of Cambridge was a great British engineering brand with 26 companies and employing 20,000 around the country. Five of these were ‘A’ companies, including Pye Ltd, which made colour television sets in Lowestoft, Pye Telecom, which made police and the armed forces radio sets, and Pye TVT making and selling outside broadcasting vans for the likes of the BBC and overseas broadcasting companies; and Pye Unicam manufacturing professional instruments. The rest were smaller entrepreneurial enterprises in electronics, printed circuits, radio and telemetry.

Lord Thorneycroft, the short-lived former Chancellor of the Exchequeur and then chairman of the Conservative Party, was the outside chairman of Pye of Cambridge, along with chairing TrusthouseForte and Pirelli Tyres.

He was a strong supporter of Britain having stronger links with Europe.

“I was sent up to Cambridge and an undertaking had been given to Tony Benn by Philips in Holland that Pye would remain a public British company. I was told this was a big opportunity but I smelled a very big rat. I was taking over as a Philips man, after a Pye man had been sacked.”

He explained his reservation to Dekker, and was assured that if he did the Pye job well, he would be given the top spot in the UK, when Dekker was elevated, as expected, to the main board in Eindhoven. Sir Jack agreed to take it on, and ensured all Pye employees of the intention to keep the firm independent, but within 10 months Dekker joined the Dutch board. In 1977, the new chairman of Philips in Eindhoven, Henk Van Riemsdijk, told Sir Jack it was too premature for him to be given the top spot in the UK. Instead Gerrit Jeelof

ENTREPRENEUR

was appointed. Unfortunately he had one objective and that was to buy out the minority shareholding and to bring Pye totally under his control to be managed the Philips way.

“He and the British group financial director, a bulldozing Dutchman if ever there was one, insisted that Philips’ financial systems apply to all of the Pye companies, including the B companies. It meant all the companies paid the same percentage towards head office in the UK and Philips in Eindhoven. I was fundamentally opposed to this strategy as the success of these companies was one of entrepreneurial leadership with low overheads. Saddling them with heavy extra costs would seriously affect

My instincts were right. The people in Pye thought I had sold them down the river. I had no allies their profitability and the flair would soon disappear. So it turned out to be after I had left Pye and Philips ended up selling the majority of the B companies.“ Philips then decided they would take over the minority stake and asked Sir Jack to help to arrange the sale. Barings bank worked for Philips, while Sir Jack found George Magan, then a whizz-kid at Morgan Grenfell, who later set up Hambros Magan to act on behalf of the minority shareholders.

“George Magan did a brilliant job and ensured that the minority shareholders really got a good deal. My position was very unpleasant. My instincts were right. The people in Pye thought I had sold them down the river and I was a wolf in sheep’s clothing. Also I had no allies on the Philips board in the UK.” He shared his frustration with Lord Thorneycroft. Sir Jack said he was heartily fed-up with what had happened. “It was perhaps again the hand of fate playing its role but the first direct elections for the European Parliament were due to take place in June

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of 1979 and I felt this was my long lost opportunity to enter politics coming about.”

“My great-grandfather had been a Liberal member of parliament in Paisley. I had stood for parliament in 1959 and was told to choose business or politics. I was very pro-Europe.

I spoke several languages and my wife was Dutch. I’d lived in Spain, Portugal and Holland.

I felt totally European. This had to be a new golden opportunity and fitted in perfectly with my desire to one day become more involved in politics.”

Lord Thorneycroft gave his behind-the-scenes support and Sir Jack was elected MEP for East Sussex and Kent South. It meant a large drop in salary. He was earning £30,000 a year with Philips, while an MEP’s salary was £9,000.

As a gesture of goodwill, Philips offered the difference for three years, which gave him time to find some non-executive directorships, including Low & Bonar in Dundee, TSB Scotland, AT Kearney, and Oppenheimer & Co. Sir Jack went on to have an illustrious career in the European Parliament. He became vice president from 1992 until 1997. He sat on the external trade committe and had responsibility for trade with Japan, then the economic and monetary committee where he was responsible for competition and wrote a book on European competition law. He also took a very close interest in drug and alcohol prevention across Europe. By the time he retired from Parliament in 1999, he was well underway with the refurbishment of Dundas.

Sir Jack’s non-stop life has also been deeply spiritual [“God made us all; you go to heaven if you’ve led a good life. It doesn’t matter if you’re a Buddhist, a Hindu, a Muslim or a Christian,’ he says] and he is well-known for a play which he instigated at Dundas on ‘The Life of Jesus Christ’. This was subsequently taken to Edinburgh, Glasgow, Uganda and, also, Louisiana State Penitentiary, where the inmates produced, directed and acted the play.

The Auld Keep now houses a small chapel for contemplation. For more worldly pursuits, there is a games room with its full-size billiard table.

Among the collection of photos on the wall is a sepia picture of the Clark brothers with the Coats in 1901 in Paisley. Sir Jack remains proud of this family lineage but he must also be fiercely proud of his own achievements. n

BUSINESS QUARTER | SPRING 14

COMPANY VIEWPOINT

SPRING 14

Business IT – Evolution or Revolution In this article, TSG’s regional director for Scotland Alan Turnbull considers how developments in technology have the potential to transform the way businesses operate, and asks the question ‘is it evolution or revolution?’

In the 10 years since leading technology services company TSG entered the market much has changed in the fascinating world of business IT. Whilst the economic downturn has seen caution around investment in IT, during this same period advances have been dramatic and the result is that for many businesses there’s now a substantial gap between their existing systems and what is now possible.

More significantly, leading edge technology has become increasingly accessible and affordable and is undoubtedly within the reach of all forwardthinking businesses.

Rather confusingly, the technology emperor has worn many new suits of clothes over the last decade. In fact, our industry is prone to hype and over-excitement, most of which drifts meaninglessly above the heads of business leaders and owners who are too busy doing what they do to notice.

However, if you cut through the hyperbole, there’s little doubt that technology is more important than ever for businesses determined to drive their competitive advantage.

One constant throughout this period of transformation is that the technology itself should never be the story but rather it should be how the technology can enable effective and efficient processes and most importantly drive productivity and profitability.

So how do decision-makers determine what’s genuinely useful? And are the decision-makers themselves occasionally part of the problem when old habits and preferences die hard?

Is it a case of ‘if it ain’t broke, don’t fix it’ or ‘if we

Alan Turnbull, TSG’s regional director for Scotland

always do what we’ve always done, we’ll always get the same results’?

In at least some businesses, a shift in mind-set is probably required and at a reasonably senior level.

I was interested to hear that our own CEO, David Stonehouse recently made a fairly radical change in his own use of technology, as he explains, “A combination of necessity, created by failing hardware, and coincidence catalysed the change although in truth it was something I’d been considering for a number of months.”

It’s not about the technology, but rather it’s about the business process and determining the most effective mechanisms to deliver a fantastic customer experience – an experience that others can’t match

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“To cut a long story short, I’ve shelved my iPad and my iPhone for the Microsoft Surface Pro and Nokia Lumia 925. The Surface, much maligned within the tablet market, actually operates as my main computer linked up to a normal keyboard and large format touchscreen.”

In many respects, the hardware itself is largely irrelevant.

What’s critical is that both devices use the Windows 8 operating system and settings flow seamlessly between them as part of Microsoft’s strategy of ‘one experience, across all devices, anywhere’.

Dynamics NAV and CRM 2013 are also part of the Microsoft story and they seem to be joining the dots in a way that others haven’t, and in all probability, can’t.

Admittedly, there’s been a lot of talk about Microsoft’s lack of traction in the device market but, then again, history suggests that they don’t always get it right as anyone who recalls Windows ME will testify.

You could argue that getting it wrong seems to have been a conscious strategy that allows them to test, learn, move forward and ultimately dominate, even though they may not always be first to market.

Amazon Web Services certainly got a head start but Microsoft’s Azure platform is catching up at a staggering rate and in many ways sits at the heart of their future plans. Even Sage – another of our key partners – has chosen to deploy its Cloud offering on Azure.

All of this brings us neatly to the Cloud – something that seems to have dominated a disproportionate amount of column inches yet I suspect most don’t really understand including many who are promoting it as a ‘must-have’ for any business.

A recent survey suggested 70% of businesses are still undecided about the Cloud, although many of these will probably be using Cloud services already in some shape or form whether that’s in

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COMPANY VIEWPOINT

A recent survey suggested 70% of businesses are still undecided about the Cloud, although many of these will probably be using Cloud services already in some shape or form

a personal or business context, and whether they realise or not.

The issue of personal use is a double-edged sword.

On the one hand, it can offer an insight into what’s possible in the world of ‘real-time’ and ‘mobility’. At the same time, it can dangerously raise expectation around what can be achieved in the business context, causing significant challenges for those who are expected to deliver – often with outdated tools and restricted budgets.

The migration of businesses to the Cloud won’t happen overnight and it shouldn’t.

More and more will see the value, but it must be a considered decision rather than a knee jerk reaction.

Get the decision right, whether that’s a full on-line deployment, a hybrid approach or a high availability solution, and the improvements in business performance will speak for themselves.

Again, it’s not about the technology, but rather it’s about business process and determining the most effective mechanisms to deliver a fantastic customer experience – an experience that others can’t match.

Technology should certainly play a part but the industry has been guilty of overcomplicating, constantly reinventing wheels and charging hefty upfront fees for doing so, when the aim is actually to make life more straightforward.

It’s this desire to make life more straightforward for our customers that has driven a significant investment in building an R & D team at TSG that combines the highest level of technical expertise with a proven track-record in delivering world-class products at small business, medium organisation and enterprise level.

Harnessing on-the-ground intelligence from TSG’s 300 specialists and technicians, with a combined total of more than 5,000 years of experience, allows R & D to focus on developing quality

products that are appropriate, accessible and affordable for our customers.

Our focus is developing products and solutions that address the common requirements shared across specific sectors, building on powerful platforms such as Microsoft Dynamics CRM 2013, to create straightforward, configurable products that deliver great out-of-the-box functionality.

Equally, they offer the possibility of limitless integration – essential when nothing in a successful technology environment can ever exist in isolation – and leave the door open for deeper customisation if required.

Best of all, when we launch TSG Tribe for the membership sector later in the Spring, the first product developed by our R & D team, it will be available both on-premise or on a subscription basis as a private or public Cloud deployment to spread the cost of ownership.

In sectors or businesses where there has been a technology lag or underinvestment, products like TSG Tribe could be the only way to bridge the gap and avoid being left behind.

Everyone is looking to achieve more for less and deployed astutely, that’s exactly what

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technology delivers.

The key is to remain in control of technology and the starting point is to understand the contribution technology can make.

So, is it evolution or revolution?

That probably depends on the legacy you’re working with but either way it’s about embracing the positives to be gained through well-considered change.

I suspect that we’re all now in a position where we can’t live without technology; the challenge for many remains how do we make the most of it?

For more imformation please call 0845 111 1888 or visit www.tsg.com

BUSINESS QUARTER | SPRING 14

INTERVIEW

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A deal-maker by nature Calum Paterson is the long-serving managing partner of Scottish Equity Partners. He’s been there since the inception, building a team of loyal investment professionals that have backed the likes of Skyscanner, Craneware, Wolfson Microelectronics, Daysoft, Sumerian and Control Circle. He speaks to BQ Scotland editor Kenny Kemp

There is a colourful handbook of venture capital innovation called Britain’s Hot Talent 2014/2015. It makes interesting bed-time reading. It’s a neat play on Britain’s Got Talent.

The book, published by the British Private Equity & Venture Capital Association, profiles the 100 most inventive and exciting growing companies in the UK today.

Scotland’s investors actually punch pretty highly in this list with Pentech Ventures named for its backing of Acunu, Par Equity’s support for miiCard and PathXL, Souter Investments supporting the medical device firm Neoss, while Braveheart likes a Sheffield University spin-out called Phasefocus.

Trumping all this, Scottish Equity Partners (SEP) have investments in nine of the elite growth companies, including Aridhia, Skyscanner, Anesco, CamSemi, Smarter Grid Solutions, ip.access, Zinwave, Control Circle and Metaforic. Quite an accolade for the investment group with its offices in a Victorian townhouse in Blythswood Square in Glasgow and a London office, tucked away off Oxford Street, near the St James’ cluster of venture funders. This selection of winners is a tribute to Calum Paterson, the managing partner of SEP, and his team. Calum, a mildly-spoken judo black-belt, is someone who is not thrown easily. He measures his words to explain why SEP has been able to chart its way through the recession.

Private equity and venture capital plays a critical role in the UK economy. Over the last five years £33bn has been invested in 4,500 UK companies, creating tens of thousands of jobs. SEP is part of this economic set-up, although much of its work is now driven from the London office.

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In the debate about ‘patient investor’ against vulture capitalists, Scottish Equity Partners are seen as patient investors seeking a return when the timing is right.

“We have built a leading position in the UK market and SEP is one of the largest venture capital firms in Europe. We have done that from a base in Scotland, albeit we obviously set up an office in London as well. The critical thing is we’ve managed to build our business without turning our backs on the Scottish market. Even today almost 30% of our portfolio is based in Scotland and we view that as a good thing,” explains Paterson.

“We’ve achieved what we wanted to do while maintaining a very strong commitment to our roots.”

It all began when Crawford Beveridge was the head of Scottish Enterprise and when Sir Ian Wood was SE’s chairman. Shortly after, Beveridge left to return to Sun Microsystems before later joining SEP as chair of its investment advisory board.

“We set the firm up in 2000 although it had taken some time to get it to the stage of being able to launch. It was essentially a start-up because although we came out of Scottish Enterprise, we really had a clean sheet of paper and pretty much started from scratch.”

“We decided that we wanted to set up

an independent venture firm because we understood the funding gaps in the market at the time and the opportunities that would be open to us if we worked hard. The point I made at the time was that we had built a really strong investment team and the only way to keep it together was effectively to let it go.

SEP could not have been a sustainable entity within the public sector over the longer term.”

It was time for SEP to leave the security of Scottish Enterprise’s Glasgow empire and stand on its own feet. The team was a determined and talented group of young men and one woman who quickly infiltrated the university departments and start-ups to identify potential winners.

“It’s incredible really. Nearly 15 years later and virtually all of the team are still here.

Richard Sparrow, Gary Le Sueur, Stuart Paterson and Catherine Simpson, are all still part of the SEP team. Brian Kerr has recently left the firm but is still working closely with us. Maybe having me as a colleague has made them all unemployable!”

Very soon thereafter, former colleagues Andrew Davison and David Sneddon, joined from 3i and Bridgepoint Capital respectively.

Since then the team has grown steadily, with the addition of specialists such as healthcare partner Jan Rutherford, CFO Lorna Foy and

This is a people business clearly in the same way as backing for investment decisions tends to be based on the quality of the entrepreneur and the management team

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INTERVIEW

Andrew Buchan as head of legal.

“It has been a fantastic team effort from the very beginning. Venture capital is a people business and in the same way our investment decisions tend to be based on the calibre of the entrepreneurs and management teams we are being asked to back. Fundamentally we want to invest in companies with the right people who have the right temperament to succeed and the right character and attributes,” he says.

The team has expanded to over 30 people with the office remaining in Blythswood Square and one in central London, where an increasing amount of investment business is undertaken. When you add in the advisory board, which includes Malcolm Thoms, former chief operating officer of Cairn Energy, David Shaw, of Bridgepoint and 3i, Walter Nimmo, who founded clinical trial business Inveresk Research, Ian Marchant, the chairman of WoodGroup PSN and former head of SSE, Brian McBride, the former head of Amazon. co.uk, Wendy Alexander, Associate Dean of the London Business School, and longest-serving member Cameron McLatchie, the chairman of BPI, the largest polythene firm producer in Europe, there is a formidible body of advice and networking. SEP is clearly in a very strong position in 2014, but there have been significant challenges along the way.

“We have had to navigate our way through some very choppy waters because the last 14 years or so have not been plain sailing on the economic front, particularly for innovative technology companies. There was the technology crash in 2000/2001 and then the more recent financial crisis. We had to stick together and work hard and carefully manage our way through all of that,” says Paterson.

After some early investments in Scotland, SEP began looking across the UK, especially to the likes of Silicon Fen and the Cambridge technology cluster.

“There are great companies in Scotland and very good deals to be done. The view that we took though was that to build SEP into a successful venture capital firm we had to broaden out and we had to go out of Scotland, in particular working across the rest of the UK. That’s what we have done.”

It has been a strategy that has literally paid >>

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INTERVIEW

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dividends to those who have placed their faith and their funds with SEP. He says that venture capital, outside of Silicon Valley, is a nascent industry that has taken its time to develop in the UK. “The Silicon Valley eco-system and its environment for creating great companies is unparalleled anywhere in the world. Venture capital over there has contributed to that but undoubtedly has also been helped enormously by it.”

“We have stuck pretty much to the UK in terms of investment focus, which accounts for 90% of our portfolio, and that is quite different to most of our competitors who have generally favoured a more multi-country model. It is based on a fundamental view that to do what we do well we have to be close to our investee companies. Our competitors in 2014 are almost entirely different from those in 2000, so perhaps the strategy we have been following hasn’t been completely daft,” he says with a disarming smile.

“I think it’s fair to say that we have been at the forefront of developing a stronger UK venture capital sector over the last 15 years or so.

Now conditions for both venture capital investors, but also for the companies that we invest in, are quite good. Much more dynamic and vibrant,” he says, adopting a more serious demeanour.

Nevertheless, whatever kind of investment is chosen an exit is the goal and ultimately required, so that a return can be made for taking the risk.

“We are long term investors, but we eventually need a liquidity event for each company we invest in so that we can return capital to our investors. This is made very clear to all of our companies from the outset. However, instead of agitating for short-term exits, we know it takes patience to build world-class companies and it takes time for companies to fulfil their potential. Typically, five to seven years would be a holding period for us, sometimes it is more, and that is long term in the context of what we do.”

SEP has had the advantage of being patient at building long-term businesses. And in the best cases, the longer the investment holding period, the better the return on capital.

“We have launched four funds, including a secondary vehicle, since establishing the

BUSINESS QUARTER | SPRING 14

firm and in total we have raised about a billion dollars for our investment activities.

We don’t view fund size and even the size of our individual investments as any particularly significant measure of success. We have chosen deliberately to stick to a size of fund and underlying deal size that we think is commensurate with our market opportunity and what we are good at.”

SEP’s investors are pension funds, alternative asset managers, private family offices, some corporates and other financial institutions.

“Our current primary fund, which closed at the end of 2011, was almost 90% contributed by existing investors, so that was a good endorsement. I think our investors view us positively and as doing our very best for them.”

And, back to team playing, SEP’s investment model also has to fit with the team’s skillsets and experience.

“There is a natural tendency to be drawn up the way in size. If you are successful, raising capital becomes relatively easier and more straight-forward. We have no great desire to become something else, however, and see ourselves very much as a venture capital and growth equity firm. Sticking to that places some limitations of fund size but that’s what we decided we wanted to do and the path we have gone down.”

SEP has had some incredible investment success which has propelled its reputation.

There is nothing more satisfying for a growth equity fund than to point to a strong technology company that’s doing well and think: ‘Ahhh, that’s one we backed’.

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“One of the most successful investments shortly after we set the firm up was the initial public offering of Wolfson Microelectronics.

Our return was something like 70 times the money that we invested. But since then we have had some other notable successes such as the flotation and IPO of Cambridge Silicon Radio and the $1 billion exit of BioVex in 2011, which I think is still the largest-ever European biotech venture capital exit.”

As we meet in Glasgow, SEP is tidying up the details after its latest investment exit. “We have just realised our investment in Control Circle, a London based IT services company, the exit from which was completed at the end of January.”

In March 2010, SEP invested £6 million in Control Circle – then with a turnover of £10 million - to help support offices openings in Amsterdam, Frankfurt, and Singapore.

In January 2014, Alternative Networks bought the business for £39.4 million in cash. The company had doubled its revenues since SEP’s investment to £21.1m, making £900,000 profit.

“Exits have held up reasonably well, but the conditions more generally have definitely been improving in the last six months. We can influence exit timing to some extent because we make more investments on our own these days, rather than with larger syndicates.

We prefer that because we can build close relationships with the teams and companies we invest in. We learned over time that the more control we have over our own destiny the better. That does not mean we do not coinvest, but we are very selective about who >>

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INTERVIEW

SPRING 14

we partner with,” he explains.

SEP is sitting very happily as the largest investor in Skyscanner, alongside Sequoia Capital, one of the US’s most famous VC firms. Skyscanner is now the number one independent travel search engine in the world, and is based in Quartermile, in Edinburgh. The company has grown over 100% year on year for the last four years and has nearly 500 employees.

“Skyscanner is a truly international business.

It has been a great investment for SEP. It has also been a real privilege for me to sit on the Skyscanner board during its phenomenal growth over the last few years and to work with such an incredibly talented and dynamic group of people.

“Often our investment in companies coincides with changes in their management teams, be it chief executive or other senior positions.

Generally those changes have been considered, discussed and agreed before we invest.

Sometimes a founder, who has been running the company for a while might reach the point of saying I want to continue to have a great influence over what happens but I want to bring in someone with more direct management experience or experience of being a chief executive.

travel search more generally. Skyscanner is already doing hotels and car hire and there are other things that can be done over time. The company has a hub office in Singapore, an office in Beijing and the company has also set up in Miami, not forgetting Glasgow as well of course.”

“The platform it has built is a great reflection on Gareth and his co-founders but also on others who have joined the company including COO Mark Logan and CFO Shane Corstorphine, who have been tremendous additions to the team,” he says. “We feel honoured to have been involved in the company over the last few years and to have helped it on its journey.”

SEP is also a majority investor in Anesco, recently named Britain’s fastest growing private company in the Sunday Times Tech Track 100 List. The Reading-based energy services firm topped the poll.

How does SEP select its portfolio? Isn’t there a chance that they turn away a nugget, like the A&R man who turned down the Beatles?

“That’s always possible, but there’s no point in worrying about it. We have our own investment model and criteria and we have a clear understanding of the kinds of

We have our own investment model and criteria and a clear understanding of the kinds of characteristics that we like to see in companies and entrepreneurs that run them “Then you get others who can take their companies all the way, such as Gareth Williams who has been a fantastic success as chief executive at Skyscanner. The vision of a founder CEO can be such a powerful thing within a business. I think Skyscanner has the potential to be one of the world’s most successful web companies.”

Everyone in Scotland is excited about the prospect for Skyscanner as a global Scottishbased winner.

“It has predominately been about flights so far but the plan has been to broaden out into

BUSINESS QUARTER | SPRING 14

characteristics that we like to see in companies and the entrepreneurs who run them. But we clearly couldn’t and wouldn’t invest in everything we see. For venture capital to work, you have to set the quality bar at a high level, but equally that doesn’t mean the companies that we don’t invest in are not good companies or indeed that they won’t go on to achieve great things - it’s just that we have to be very disciplined, selective and have the confidence to make decisions,” he says.

“We are, I hope, still quite modest and grounded. We have never been particularly

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exuberant on the trumpet blowing front,” he says.

For SEP, it is about relationships. Paterson reckons the challenges associated with building great companies are tough enough without problematic dynamics with the people you are meant to be backing.

“Investment decision making is the combination of objective assessments and a lot of subjective considerations, which inevitably involves making value-judgements on the team and on the various other aspects of the businesses that we see. We are very aware that doing what we do is a privileged activity. We try to ensure that for the people who come to us, it is a positive experience. Even if we don’t invest in them, we want them to have had some benefit from the interaction with us, and who knows, we may invest at another time,” he explains.

The SEP team comprises of people that have good investment skills, commercial judgement and those who have particular industrial or technology backgrounds, providing a blend of skills and experience. SEP’s investment committee (made up of its partners) is then the gate to get through - it’s a rigorous process.

What is the view on the economic and market outlook from the SEP hotseat?

“We are cautiously optimistic, as always!

Market conditions are improving, the climate is good, and there is a much higher level of confidence. I think we are slightly conscious of valuation expectations being out of step with underlying reality and we are maybe seeing that in the IPO market too.”

Calum Paterson is a person with an equitable temperament, forged by years of tough bouts on the martial arts floor, where respect for your opponent is in-built.

“I think we need more encouragement for business generally - right across society. More confidence and more ambition. Perhaps in the past Scotland hasn’t been as strong as it might be in that regard but I think things are getting better. I am confident that Scotland can have a successful future.”

A cautious Calum Paterson says SEP is neutral about the forthcoming referendum debate, but believes all parties, whatever their political hue, must do their utmost to support enterprise in the economy. n

INTERVIEW We take it all into account.

SPRING 14

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BUSINESS QUARTER | SPRING 14

ENTREPRENEUR

SPRING 14

Marvels in Morphsuits The Morphsuit is already a stunning global success. The three founding creators are now using this to build a market leading position in the fancy dress category. They have some great super powers literally up their sleeve. Kenny Kemp meets Ali Smeaton and Gregor Lawson, two of the three entrepreneurs, in Edinburgh

BUSINESS QUARTER | SPRING 14

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If you start spotting Spider-Man in Glasgow, the Iron Man in Edinburgh, and Captain America in Aberdeen, rest assured you are not losing your marbles. The chances are they will be Marvel superhero fans wearing the latest Morphsuits developed by the Scottish company AFG Media. And with suits that have added ‘super powers’, this will surely take Morphsuits into the stratosphere and beyond.

In case you have been living on planet Zog, the Morphsuit is a tight-fitting, full-body garment of spandex and polyester that has become a fancy dress sensation. The core benefits - apart from the fun they create - are you can see through, breathe through and drink through the suits. Among the crazy facts about Morphsuits is the world record for drinking a pint of beer through the suit is 6.3 seconds.

Gregor Lawson, Fraser and Ali Smeaton, the three fun-loving founders of this global phenomenon, are super serious about their business. Neither wonder. The fancy dress industry worldwide is worth an estimated

SPRING 14

£3.5 billion and it is growing. Those who love dressing up for almost any given occasion have an insatiable demand for innovation – and that is keeping the Morphsuit men focusing on this big prize. The Morphsuit is already in a league of its own but some tantalising developments for the Edinburgh-based business are attempting to keep it way ahead of the pack.

Sitting in the modern Edinburgh office of AFG Media, near the former depot for the city’s cable-drawn tramcars, there is a buzz of activity. In the upstairs balcony, Ali and Gregor are modelling some of their latest creations, while downstairs the marketing and administrative teams are helping keep the vital social media chat up-to-the minute.

For Morphsuits is an innovative and impactful business that has been propelled by the power of Facebook – and Morph fans have heard about a new range of licenced Marvel costumes with ‘augmented reality’, which will bring party-going ‘superpowers’ to mimic Spider-Man, Iron Man, Wolverine, Captain

ENTREPRENEUR

America and Deedpool. “We’re aiming to be the first global brand in the fancy dress sector synonymous with awesome costumes incorporating smartphone technology,” says Gregor Lawson, the bearded co-founder, after returning to more customary jeans and T-shirt.

For four years, he explains, thousands of fans have been clamouring for Morphsuits to follow the success of their Power Rangers outfits and go for Marvel superheroes, especially SpiderMan. But such characters are licensing golddust, and AFG Media have had to spend time winning over Disney-Marvel.

“It was natural for people to ask for SpiderMan because he effectively wears a Morphsuit.

It’s a no-brainer. But when it comes to working with a big company like Disney-Marvel, it takes a long time to get the licence and sort out all the legal work. Now we’ve done it and we’re incredibly excited,” says Gregor.

It is very early days with Disney-Marvel but with George Lucas’ Star Wars franchise also coming into the fold, there are some eye-watering

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prospects for Morphsuits, especially now that they are endowed with Super Powers.

In the meeting room, Gregor and Ali [Fraser is in a series of commercial sessions in London] are delighted to demonstrate how augmented reality is incorporated into the Iron-Man suit - by using a smart phone to identify a marker, Iron-Man appears to fire a laser-like beam from his hands. The mock ‘electricity charge’ can then be screen-grabbed and shared with friends who can ‘Like’ the image. The ‘augmented reality’ Zappar works with the free Morphsuits smartphone app integrated with the costume and brings the hero’s superpowers to life. Gregor then dons a monster’s head made from latex, fixing his iPhone into the head to create a moving Cyclop’s eye. It’s brilliantly inventive and generates hoots of laughter. It might well generate piles of cash too.

This is the new world of the Digital Dudz’ Cyclops Masks and Zappar Codes helping to bring superhero costumes to a higher plain >>

BUSINESS QUARTER | SPRING 14

ENTREPRENEUR of experience.

“We see this as the start of a costume revolution from two-dimension products to something with interactive 3-D,” says Gregor.

Morphsuits’ collaboration to create Marvel Super Heroes in Europe with patented wearable smartphone technology is the result of a hook-up in August 2013 with Mark Rober, a former NASA scientist, joining the founders.

He is a creative brain behind Digital Dudz, who is using the disruptive technology of iPads, tablet and mobile phones to bring fancy dress alive – or in some cases, dead. One of Rober’s wackiest wearable inventions involves using duct tape to attach two iPads to his chest and back and, adding some fake blood to give the impression of looking straight through a zombie’s body.

“We’re all about innovation. That’s our mission to deliver the most impactful costumes the world has ever seen. Given the speed of technology, the potential for impact and innovation has never been greater. Mark now works with us and he’s a huge addition to the team. He tells you that the computer in an iPhone is more powerful than the one he used to land the Mars Rover. The potential of doing things with phones and making an impact to another level is massive,” says Gregor.

Gregor and Fraser are from Gullane, in East Lothian, while Ali is from Dollar in Clackmannanshire. All in their early thirties, they were great mates at Edinburgh University, dabbling with businesses ideas on the coffee table in the front room of their student flat. However, they all went off to pursue professional careers. Before Morphsuits began, Gregor was working for P&G in fast-movingconsumer-goods for about eight years. He worked on brands including Gillette, Pantene, Olay, working in Dublin, London and Geneva.

“I thoroughly enjoyed my job. You were given a robust on-boarding into the world of marketing and brand-building. You are given theories and processes to apply to reallife business situations. It’s helped us along the journey. We’re incredibly focused on the consumer, that’s something we’ve learned from P&G with its ‘Consumer is Boss’ saying.”

Fraser Smeaton was working for BT and heading up their broadband department, which was marketing with more of a

BUSINESS QUARTER | SPRING 14

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commercial focus. Today he is the commercial director and driving along many of the production issues.

Ali Smeaton, the operations director for AFG Media, worked for Ernst & Young where he trained as a chartered accountant in Glasgow.

He joined Barclays Bank in leveraged finance as a director in Scotland and Dublin. With Ireland in the corporate doldrums, he decided to leave EY to become a full-time entrepreneur.

“In the early days it was a strength of ours that the three of us had generally complementary skills and shared a common goal. Our skills set fitted together really well.

“In the past four and a half years, we’ve found that our years in the corporate world have certainly helped us. We’ve all drawn on our experience, skills, qualifications to help grow our business,” says Ali. Relationship building has been a key: the logistics firm that works with the business was introduced through contacts from Ali’s previous employment at Barclays Bank and a buying agent was found through similar introductions.

“Gregor and Fraser have tapped a huge wealth of knowledge of marketing,” says Ali, adding that two of the marketing department are former P&G hands.

Morphsuits was not AFG’s first business. There

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had been Pundit It, which was for sports lovers who wanted to offer their ‘expert’ assessments of football, rugby and other sports. It was an online forum taking sports stories and events and allowing amateur pundits to post and write their own reviews. It was up and running with several thousand pundits but it was taking time to monetise.

“During this time we stumbled on the Morphsuit idea, and we liked the thought of selling something, rather than a service and a forum,” says Gregor.

“When we founded the business we all had corporate jobs, so we made the AFG Media headquarters in Gullane, which is where Ali and Fraser’s parents live. Their mum still has a role in helping with some administrative tasks, such as returns,” adds Ali. The guys are clearly innovators in the fancydress sector and nothing else touches the Morphsuit.

“We are constantly challenging ourselves to see what we can do with our products to stay ahead of the global costume industry. In the early days, the impact from the six coloured suits that we launched was amazing. That was enough to create the buzz.”

The first set of suits were put into production in January 2009 and by the summer of that

SPRING 14

year they were making a serious splash. Within six weeks, they had 10,000 Facebook fans.

“This was off the back of the plain suits and getting out and about. It was word of mouth.

People had not seen anything like it and they could see that it was good fun. Word just spread. Most people like a bit of attention from time to time. Morphsuits are about confidence, not body-type,” explains Gregor.

The three were still working in their full-on jobs when the buzz really took off.

“We could tell within the six weeks that something special was happening. The shock and awe effect that the suit created helped drive awareness. Gregor and Fraser went to the international rugby Sevens at Twickenham.

Then I roped in some buddies in Edinburgh and we went to the Heineken Cup final at Murrayfield in May when Leinster beat Leicester. It was about showing people the fun they could have with Morphsuits,” says Ali. The first year was predominantly online sales and AFG turned over £1.1 million, entirely through the website. The viral impact of social media has been immediate and remains paramount for Morphsuits.

Gregor said:“We then figured out the potential to be more than something that helped us pay for our ski holidays every year. The real tipping point was the run-up to Hallowe’en in 2009.

One day we sold £20,000 worth of suits. That’s where it was like ‘Holy Smokes’. We knew that Hallowe’en was small fry in the UK compared to the US. That’s when we needed to get the websites going for various countries and tap the market for fun, outgoing fancy dress.”

With the initial hard work done and Morphsuits making an early impact, there was a deep-seated fear that being employed and running the business on a part-time basis meant they were missing out on opportunities.

It was time for all three to go full-time. The first range of six suits was soon expanding with skeletons, flags and now a range of over 350 designs, including innovative costumes from the recently launched Morph Costume Co Foul Fashion brand golf clothing under the name Royal & Awesome. “We had no experience of manufacturing garments, which is really what a Morphsuit is. We went to AliBaba. com, which does everything from crude oil to JCBs, and we worked with some guys

ENTREPRENEUR

The real tipping point was the run-up to Hallowe’en in 2009. One day we sold £20,000 worth of suits. That’s where it was like ‘Holy Smokes’ who specialised in high-viz vests, rather than Morphsuits. We went back and forth to find out how to get it done,” explains Ali. The fancy dress industry is riddled with tacky, poorly-made items that are disposable after an evening’s wear. For the AFG guys, quality was the bedrock. It had to be a wearable garment that could be washed and used again, without losing its colours and sheen. The wearer had to be able to see out through the fabric, but noone would see in. With the face covered, the anonymity made it special.

“When people buy a Morphsuit they want to keep on wearing it. They buy it for a party but keep wearing it again and again. It took us time to get the perfect mixture of spandex and polyester so that it would stretch and fit perfectly,” explains Ali. “We worked through our Chinese manufacturer and put a $1 million worth of business before meeting them face to face.

Everything was done on Skype. This is the nature of global business in this day and age,” says Gregor.

The trio are passionate entrepreneurs who get along well, work hard and recognise they have had a few lucky bounces. They know there are copy-cat competitors watching them closely with the firepower to muscle into their market.

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“We spend a great deal of time getting the design absolutely perfect. Disney-Marvel will share a style guide with us and we will work through adapting that with the Morphsuits construct. Then the digital mock-up goes back and forth to make sure it is perfect before final approval.”

It is ready for sample production to look at how the colours blend, working with the Chinese team to bring the digital mock-up to life as a garment. Once the team in Edinburgh gives sign-off, it goes into production. The main design team, using Apple Mac, is based in Walsall.

“We’ve kept the fixed costs in the business very low by outsourcing everything,” says Ali. “Where we don’t have the know-how, such as manufacturing and logistics, we get someone to help. We have to ensure that thousands of unsold suits are not languishing in a warehouse somewhere.”

The colour-fast suits are made in ten factories across different regions of China, including Shanghai, Schenzhen and Ningbo. The product has to be robust enough to be washed, especially the suits for children. It takes between four and six weeks to make up to 100,000 suits, and then around four weeks to ship to the UK or the United States. >>

BUSINESS QUARTER | SPRING 14

ENTREPRENEUR For special launches, the suits, which weigh only a few kilograms, can be sent by air freight.

A 40ft container can take 30,000 suits.

In 2013, the business was 50/50 online sales and sales through retailers, with the multiple retailers from Party City, Kmart, Argos, and supermarket chains, such as ASDA and Tesco now seeing the mainstream opportunities.

“In the early days we were building brand awareness through the website and keeping everything cool and new, which was about exclusivity for our products, but the demand has come strongly from the trade. If we hadn’t met that demand, someone else might have stepped in.”

Morphsuits had stolen a march on the other players, but the AFG guys know they need to diversify beyond spandex into other fancy dress, such as the Cyclops latex masks and suits.

“By the time that they locked onto us we were a year down the line and Morphsuits have become the category. This is exciting because we believe we are the biggest brand in fancy dress by some margin. It’s about building on this asset. We would not exist to the extent that we do without Facebook,” says Gregor.

Most businesses today extol the virtues of social media, buy Morphsuits created a clamour.

“We believe we were the first brand to launch using Facebook. That was borne out of necessity because we didn’t have any budget. Facebook was a different medium four years ago and it was easier to drive fans and engagement without spending a huge amount of money,” explains Gregor.

Facebook allowed AFG Media, then a tiny company in East Lothian, to tap a global audience where social credibility was at the heart of being accepted.

“What better way for someone to have social credibility than to be snowboarding down a mountain in a Morphsuit; or at a party wearing a suit and surrounded by hot-looking women; or doing a charity run or a school sports day?

There was some very powerful imagery,” says Gregor.

The Morphsuit is so striking it markets itself.

The initial feedback gave the guys confidence to trial in America and Australia where the potential markets were exponentially massive.

BUSINESS QUARTER | SPRING 14

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“We were able to test these markets by finding a distribution centre and then shipping in hundreds then thousands of suits. Once we were established we opened up Facebook advertising to them. You can soon tell through sales and interaction whether you have a win or not.”

The market to crack now is for children.

“Kids’ fancy dress makes loads of sense. Kids wear it seven-days a week and they continue to grow and the market is significant. The demand is there. We launched in earnest about two and half years ago and we’ve been advertising on the Cartoon Network to drive awareness. The kids’ market is great for us but it is highly dependent on licence. The kids want to be the people they watch on television. We are looking to extend our range of licenced Morphsuits in this category,” says Gregor.

Funding such meteoric growth has been part of the journey – and it sparked some early interest from a potential business.

The avenue to take was more funding. In June 2012, BGF, which is funded by the UK Government through UK banks, signed a £4.2 million deal with AFG Media which has helped fund the growth. The transaction was handled

by Grant Thornton and DLA Piper for BGF and EY, Ignition Corporate Finance and Morton Fraser for AFG Media.

“We’ve got great partners in the BGF and in Barclays Bank, which is where I came from. Ally

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Scott and his team at Barclays have been very supportive, while Duncan Macrae, formerly of Dunedin Capital Partners, has joined our board from BGF,” says Ali. Moreover, this has instilled a higher level of corporate discipline, with the likes of Ralph Kugler, formerly on the board of Mars, InterContinental Hotels and Unilever, also making an investment and coming on board.

“It’s been an overwhelmingly positive experience for us not just in terms of the cash that they have given us for our strategy, but also our young business needed shoring up in terms of the discipline of monthly board meetings and reporting structures. We’ve been encouraged to do this to improve our governance. I get a massive kick out of Ralph working with us. The business is better as a result,” says Gregor.

The company, with sales of £10.5 million, has also increased headcount from seven to over 25 to meet the demands. The team are all high-energy people who relish the kind of fun and games that go with the territory, including Friday evening workouts at Cross Fit, at Mission Training Systems in nearby Canonmills.

So Morphsuits, the future?

“We love what we do. We’re really passionate about it. We’ve worked hard - often to 2am and played hard too.”

It is all about fun. That’s how serious these guys are. n

SPRING 14

COMPANY PROFILE

Residential property investment market gathers momentum With steady signs of a shift in residential property back to a seller’s market, Peter Grant looks at the indicators and why Scottish property, in particular buy-to-let, should be considered a good investment.

Over the past 3 months Grant Property has seen a marked increase in the levels of investor interest in the residential buy-to-let market across the major Scottish cities.

This is due, in part, to the recent statements from The Bank of England and the Treasury reassuring investors that interest rates are likely to remain low for the foreseeable future, and further positive data from the major building societies showing average price increases across the UK in 2013 of 8.8% (according to the Nationwide Building Society). Additionally the banks and Building Societies are starting to ease restrictions on mortgage lending for the buy-to-let market making it easier to buy and refinance existing holdings.

Grant Property believe that 2014 is the year to invest in residential property with Scotland leading the way, returning to levels of activity similar to 1997, fast cementing itself as a property investment hotspot. In the last 16 years, Grant Property has helped clients from 30 countries buy over 1,700 properties and specialise in buying Victorian and Georgian flats in prime city centre locations for buy-to-let investment.

“We focus on traditional properties as this is what lets well and gives the best returns on investment with rental yields attracting up to 8%...significantly higher than London’s average 2% yield. Across our portfolio we have maintained a 95% occupancy rate which is again testament to our approach,” says Peter Grant, CEO and Chairman of Grant Property.

“Our tenants, predominantly students and young professionals, want a space which has been totally modernised internally, and with vast experience

Peter Grant, Grant Property

in this sector we know how to renovate and furnish properties to maximise their appeal. In February alone we pre-let 192 flats for the new academic year starting in October.”

“Grant Property provide a fully holistic service in-house which makes us very different from our competitors. We carry out a full audit of all properties on the market and undertake comprehensive due diligence before offering investments to our clients. We then manage the full process from the purchase,legalities and all necessary consents for the property. Grant Property then work to deliver a fully renovated and furnished property, all on a fixed price basis, within a 6-8 week timeframe, ready to let.”

“Student accommodation is very different now from the type of accommodation I had at University over 30 years ago,” reminisces Peter, “and operators such as Unite have done a lot to

The market indicators we are seeing now are very similar to those the company experienced in early 1987 which was a major turning point in the residential market before a period of sustained growth

45

raise the bar for the whole sector in terms of the standards students now expect. This is bad news for the owners of poorly finished flats as they will struggle to achieve good rental levels but good news for more professional providers such as Grant Property providing high quality accommodation.”

At Grant Property, our team has witnessed a 45% increase in buy-to-let property sales between 2012 and 2013, and see this trend continuing in 2014.

“Most of the properties we are bidding on are now attracting sufficient interest for closing dates to be set with good properties attracting between five and 15 bids in most locations,” Peter illustrates.

“We recently bid on one property in Edinburgh where we were one of 25 bids. This is a big change from 3 months ago and really shows the renewed appetite and confidence in the residential sector.

The market indicators we are seeing now are very similar to those the company experienced in early 1987 which was a major turning point in the residential market before a period of sustained growth. A number of senior market commentators share our views that we should see a sustained level of capital growth over the next 3-5 years within prime city centre locations and with student admissions increasing by 9.3% across the UK for the year 2013-2014 according to UCAS, the student buy to let market looks set to continue being underpinned by strong tenant demand.”

Grant Property Investment is one of the UK’s top buy to let residential property investment and management companies and is ARLA accredited. For more information visit www.grantpropertyinvestment.com. peter.grant@grantproperty.com

BUSINESS QUARTER | SPRING 14

INTERVIEW

SPRING 14

A legend in his own lifetime Martin Gilbert is the founder of Aberdeen Asset Management which has taken over Scottish Widows Investment Partnership in Edinburgh. Ian Fraser meets the consummate deal-maker and remarkable Scottish fund manager who has been to the brink and back, and he is still smiling

Martin Gilbert is one of the corporate world’s great survivors. Between 2002 and 2004, the 58-year-old lived through a crisis that came close to destroying his firm and ending his career. The asset management firm he cofounded through a management buyout in 1983, Aberdeen Asset Management, was up to its neck in the so-called ‘split capital’ investment trust scandal – and the investors it had impoverished were baying for blood.

The crisis saw shares in several Aberdeenmanaged split capital investment trusts wiped out. It had been fuelled by a cocktail of weak governance, over-leverage, incestuous crossshareholdings between trusts topped by some dodgy fundraisings. Some describe it as a precursor of the banking crisis of 2007-08.

Aberdeen had marketed split caps, savings vehicles which have both capital growth and yield components, as ‘low risk’ but the debacle

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left 50,000 investors nursing losses of £700 million. As the crisis intensified in July 2002, Gilbert was dubbed a ‘sophisticated snake oil salesman’ by John McFall, Labour MP for Dunbarton and chairman of the Treasury committee – a barb which really hurt – while another MP said the Scotlandheadquartered group’s marketing methods were ‘the unacceptable face of capitalism’.

To make matters worse was that Aberdeen was burdened with £240 million of debt, a hangover of an acquisition spree in the late 1990s and early 2000s. The group’s share price nose-dived from a high of 725p in early 2001 to 18 pence in 2002, causing its market capitalisation to shrink from £1bn to £85m.

There were fears Aberdeen might be unable to service its debt pile and go bust. Gilbert says: “We didn’t really realise how bad it actually was. I never really thought we would go

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under – but a lot people did.” Later that year, Gilbert attended a board meeting at the fund management group’s granite-fronted head office in Aberdeen’s Queen’s Terrace. The laidback Aberdonian, then 47, told the board he was willing to fall on his sword.

“Martin had not been directly involved in the way in which [the split caps] business was run but, quite properly, he was taking full responsibility,” said Sir Malcolm Rifkind, a former Conservative Secretary of State for Scotland, who was a non-executive director of Aberdeen from August 2000 until 2011.

“He told us if we felt it would help he was prepared to go. We thanked him and said that’s something the non-executives would have to discuss. We then came to the view that, although there was a legitimate cause for criticism and he had taken his eye off the ball, there was no suggestion of any failure of integrity or ethical standards on his part.

In addition, we came to the judgement that – even though he was tarnished – Martin remained the best asset the company had.”

Gilbert said that, of all the directors on the Aberdeen board at the time Rifkind was “the most robust during it all.” Having served as foreign secretary under Prime Minister John Major, Rifkind had been through the mill of other crises and was cool under fire.

At the time, journalists found Gilbert was refreshingly open and honest about the pickle he and the company were in. In September 2002, he said it felt like Aberdeen had been hit by an Exocet missile. “It just went in and caused pandemonium and, of course, everyone gets upset, your clients, staff. The whole company just froze for about a year and a half.” Without this self-deprecating approach to the crisis, Gilbert may well have struggled to rehabilitate himself.

The intense media, political and regulatory

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criticism of Aberdeen eased off a bit in October 2002 when Chris Fishwick, the executive director who had run the collapsed ‘splits’ business, was effectively thrown to the wolves.

Gilbert explained: “He was the one who ran that area, hence the reason he thought ‘I will do the decent thing’.” But the prospect of unquantifiable fines and compensation payable to investors who lost their shirts continued to hang over the company’s share price for at least two years. In the end, as part of voluntary settlement brokered by the FSA and Channel Islands regulators, Aberdeen Asset Management paid out £75m in compensation.

The subsequent turnaround in the company and Martin Gilbert’s fortunes has been remarkable. From being a pariah at real risk of extinction, the company has grown to be the largest independent asset management company in Europe. It has done this though a mixture of organic growth – which mainly involves winning investment mandates from institutional investors like pension funds – and a string of opportunistic and keenly priced deals.

In its latest annual results the company said its underlying pre-tax profits for the year to September 2013 rose 39% to £482.9m.

Gilbert said the surge in profitability was almost entirely down to strong investment performance. “We’re good at what we do. We’re good at global equities, good at emerging market equities, good at Asian equities. As you know, asset managers are geared plays on the market. If a pound of extra revenue comes in on a fixed cost basis, a lot of it drops to the bottom line.

The performance drove up Gilbert’s pay and those of many colleagues. He was paid £5.1m last year, including a bonus worth ten times his £500,000 salary. Hugh Young, the global head of equities, was paid £5.1m too, including a bonus of 13 times his £352,000 salary.

Corporate governance group Pirc thought these rewards were ‘potentially excessive’ and recommended that investors should vote against Aberdeen’s remuneration policy. In the end, however, the protest fizzled out, with 86% of shareholders voting in favour of the group’s remuneration policy.

Speaking at the annual meeting on 16 January, Gilbert said: “Other people are paid more than me in the industry. I am always delighted with

my remuneration. If we do a good job for our clients, we do well, if we do a bad job for our clients, we do badly.”

Many attribute Gilbert’s success to his easy manner and self-deprecating charm. Rifkind said: “A lot of people under-estimate Martin because he comes across as laid back – the truth is he is incredibly focused. Very single minded. Even though he has a personality which is incredibly gregarious and good fun and the sort of person you could easily share a pint with and not realise how senior a financial figure he is.” These are characteristics which stand Gilbert in good stead when he is seeking to do deals.

One senior City of London source said “Martin sees the big picture. He has a gift for business.

He enjoys it. For Martin, every day is fun. He is constantly looking for new opportunities. But

People underestimate Martin as he comes across as laid back – the truth is he is incredibly focused he is not a details man. If he makes the odd mistake, that’s for others to tidy up. He would never micromanage anything. He has others who cross the ‘i’s and dot the ‘t’s.”

Describing his approach to deals, Gilbert said: “What we’re good at is recognising the times to buy, recognising the way the market’s changed and integrating them. We’re never as good as we would want to be at integration but we’ve got better at it.” He said that to make an integration a success, “you have to make a decision, communicate it early, and implement it swiftly. “ At the height of the split caps crisis 11 years ago, Gilbert and his boardroom colleagues accepted that Aberdeen’s reputation as a retail asset manager was so tarnished it could have no future in this part of the market.

So, in January 2003, he sold the retail fund management business to New Star Asset Management for £87.5m.“We had to get out

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INTERVIEW

of retail,” said Gilbert. “Otherwise we would have lost all the assets. We had to sell it while there was still some value left in the business.”

The real turning point however came eight months later when Aberdeen and New Star did a joint ‘carve-up’ takeover of the beleaguered Edinburgh Fund Managers which had some good franchises but was haemorrhaging funds owing to poor investment performance and inadequate management and governance.

The deal saw Aberdeen take over EFM’s ‘closed-ended’ business – mainly investment trusts, but not split capital ones – while New Star took EFM’s mutual funds and OEICs, the funds targeted at individual investors. In purely financial terms, it was one of the best deals of Gilbert’s life. It also brought talented younger managers like Anne Richards (now Aberdeen’s chief investment officer) and Rod MacRae (now Aberdeen’s group head of risk) into the fold.

Since the EFM takeover, Aberdeen has capitalised on a trend among large banks to offload their fund management businesses. The banks have, to an extent, been forced sellers, as they struggle to stay abreast with tougher post-crisis Basel capital requirements or because the idea of ‘too big to fail’ sprawling financial supermarkets is no longer quite so acceptable.

So Aberdeen bought the London and Philadelphia-based fixed-income business of Deutsche Asset Management from Frankfurtbased Deutsche Bank in 2005. According to the US magazine Institutional Investor, the takeover, which tripled Aberdeen in size, was ‘one of Gilbert’s biggest coups’. Aberdeen defeated rival bids from Schroders and French bank BNP Paribas with the help of financing from investment bank JP Morgan Cazenove.

In August 2007, just as the global financial crisis was erupting, Aberdeen paid £8.95m for Glasgow Investment Managers. Then in June 2009, Gilbert paid £250m to Zurichbased Credit Suisse for Credit Suisse Asset Management, gaining £35bn of assets to manage. He topped this with an £84.7m deal to buy RBS Asset Management, which specialised in funds of hedge funds, from the state-rescued Royal Bank of Scotland. Aberdeen also paid £130m for Nicola Horlick’s Bramdean Alternatives investment company in November 2009. The business was reinvented as a private equity specialist as Aberdeen sought >>

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INTERVIEW

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to distance itself from the embarrassment of its investment in Bernard Madoff’s $65bn Ponzi fraud. In commercial property investment, Aberdeen acquired Germany-based Deutsche Gesellschaft für Immobilienfonds (DEGI) in 2008, snapping up London-based Goodman Property Investors in the same year. The latter had formerly been Aberdeen’s own property business, a division it had been forced to jettison in order to ensure it could float away from the splits crisis.

During the rescue and rehabilitation phase, the board occasionally had to rein in Gilbert’s deal making tendencies. Rifkind, who stepped down as a non-executive director in 2011, told BQ: “There was rarely a board meeting when Martin did not offer his views on potential acquisitions… There was a feeling on the board that you mustn’t overdo it – to ensure you had fully and properly absorbed existing acquisitions before starting to contemplate anything beyond that.” He also said the board became more cautious about deals following the split caps fiasco. The near death experience of 200204 is clearly seared on Gilbert’s consciousness.

The pain was deepened because at the time Aberdeen was heavily indebted and Gilbert had a consortium of rapacious banks with which to contend. The experience taught Gilbert a crucial lesson. “I vowed from 2002 onwards we would never breach a bank covenant again.

Every purchase that we’ve made since, we have issued shares, so we’ve made the balance sheet stronger. We’ve strengthened this business very considerably.” That meant allowing banks including Credit Suisse to have significant positions on the share register and directorships on the board. Limiting debt has almost become an obsession for Gilbert. Today, Aberdeen has absolutely no debt – “We’re sitting on £400m of cash,” said Gilbert.

In September 2010 Gilbert told the Financial Times that no further deals were planned, saying “we’ve really got everything we need” and suggested that he would henceforth focus on consolidation and organic growth.

It was a pledge that he honoured – but only for three years. After much media rumbling, Aberdeen last October confirmed it was paying £650m for Edinburgh-based Scottish Widows Investment Partnership. It seems to have been too good a deal to miss with some cost savings

BUSINESS QUARTER | SPRING 14

arising from the proximity of its existing £50bn Edinburgh based investment operation at 40 Princes Street (itself built on the takeover of Murray Johnstone in 2000 and EFM in 2003).

With £136 billion of assets under management, SWIP is the largest takeover Gilbert has ever made. When added to Aberdeen’s existing £196 billion of assets under management the deal will take the enlarged group’s assets under management to more than £330bn, propelling it past Schroders as the biggest listed investment group in Europe. The deal, expected to complete at the end of March 2014, has many advantages for Aberdeen one of which is it gives it a stronger position in less volatile assets classes included fixed income. Aberdeen was able to see off rival offers from Sydneyheadquartered Macquarie Group and Montreal-

Limiting debt has become an obsession for Gilbert. Today, Aberdeen has absolutely no debt based Royal Bank of Canada since the vendors, Lloyds Banking Group, had a preference for a partner with an established UK business.

Lloyds will end up owning 10% of Aberdeen’s equity, cementing a distribution alliance which sees the bank – which plies its trade under brands including Bank of Scotland, Halifax, Lloyds Bank – becoming a conduit for ‘asset gathering’ for Aberdeen. While generally positive about the deal, Nic Clark an analyst at Charles Stanley, said “There will be some concern about asset retention following the deal and much will depend on how the relationship with Lloyds develops.”

Speaking at Aberdeen’s annual meeting in January, Gilbert said Aberdeen had ‘learned a lesson’ when they bought businesses from RBS but were unable to benefit from the growth of its wealth business, including Coutts and Adam and Company. “We structured the transaction more cleverly than in the past,” he said.

Gilbert declined to respond when asked if SWIP

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had lost its way as an asset manager prior to the deal, saying only: “I think [Lloyds CEO] Antonio Horta Osorio realised that banks are not great owners for these sorts of businesses and he felt that, from the clients’ point of view, it would be better if it was merged with us.”

The deal takes assets managed by the combined Aberdeen/SWIP operation in Edinburgh to £170bn. This means Aberdeen’s Edinburgh operation will be about the size of Standard Life Investments. It will also mean half of all Aberdeen’s total assets will be managed from the Scottish capital. A source close to Gilbert said that, despite the noises that have been coming out of Standard Life and Alliance Trust, the firm has no plans to turn its back on Scotland should it vote for independence.

Asked whether all the group’s Edinburghbased employees would be housed in the same building, Gilbert said. “Eventually it will be under one roof, we’re just not sure which roof.” Aberdeen’s Edinburgh office is located overlooking Princes Street, directly above a branch of H&M Hennes & Mauritz. SWIP is at One Morrison Street opposite the eponymous insurance company, which Lloyds still owns.

Gilbert says, “It’s amazing. When we bought Hugh Young’s business they were at £90m and we were less than £200m. When we did Prolific [buying Prolific Financial Management from Scottish Provident in 1997] we were £2bn and they were £4bn. The figures have become so vast it’s almost become incomprehensible.”

Aberdeen has catapulted itself into the big league – it is now the largest quoted asset management firm in Europe and the sixth largest independent asset manager in the world. But it remains a David compared to the Goliaths of the industry. The US firm BlackRock has assets under management of £3.5 trillion, Vanguard £1.2 trillion and Fidelity £1.14 trillion.

Gilbert believes the SWIP deal, the largest in Aberdeen’s 33 year life, gives the company the critical mass to take on such Goliaths on their native soil – it takes overall assets under management above the psychologically important $500bn threshold. “Half the world’s AuM is in the US so it’s vital that you have a big presence there in terms of distribution. And it is something we have been building up.” In the United States Gilbert is more inclined to grow organically than by acquisition, saying he does

SPRING 14

not envisage acquiring a US asset manager.

“No I think culturally that’s very difficult.”

As a result of the global financial crisis, which hit all financial stocks, Aberdeen Asset Management’s shares broadly halved in value between May 2007 and October 2008. While clearly serious, this was a much lesser fall than that experienced by most banks. And the company’s shares rebounded strongly on the back of investors’ faith in Gilbert and his revised business model – which boils down to delivering good investment performance to institutional clients worldwide. The shares rallied during 2012 and 2013, peaking at an all-time high of 492p in November 2013.

However, they have since fallen back to 382p on 10 March 2014. That 22% slide was precipitated by City fears of an exodus of investors’ cash from emerging market equities – which was in turn triggered by the decision of the US Federal Reserve to call time on its quantitative easing progamme.

The ‘tapering’ or unwinding of QE, first announced by Ben Bernanke in May 2013, and also pursued by his successor as Fed chair Janet Yellen has caused palpitations across the globe, with flows of cheap money into the emerging markets going into reverse. Currencies and investor confidence in emerging countries including India and Brazil have taken a hammering, and the uncertain global backdrop became even more uncertain after Russia started its rough wooing of Ukraine.

One knock-on effect was a 3% fall in Aberdeen’s assets under management. They fell to £193.6 billion at the end of December.

Speaking at the annual meeting in the Granite City on 16 January, Gilbert said: “We’re seen as a proxy for emerging markets which is fair enough. But a large percentage of our business is not related to emerging markets and the SWIP transaction helps that enormously.”

Even since the splits crisis subsided in 2005, there have been some bumps in the road for Gilbert. Last September, the Financial Conduct Authority, one of two successor bodies to the FSA, fined Aberdeen £7.2m for failing to protect clients’ money. The regulator said that funds placed in money market deposits with third party banks between September 2008 and August 2011 were incorrectly labelled and not subjected to the correct client money rules.

Gilbert said: “We were depositing client money with various banks overnight in order to get a better rate. And we booked them wrongly – we booked them as Aberdeen Asset Management. That was basically it, and also we did not have the right documentation in place. No-one lost money, but it was sloppy administration.”

Another embarrassment for Gilbert personally

Out of office: Martin Gilbert in short Martin Gilbert is 58. His wife, Fiona, is professor of radiology at Cambridge University, and they have three grown-up children. He is still very active away from the office. He sails his own yacht with family and friends in the Atlantic and the Mediterranean. He is a keen golfer and has a handicap of 15, up from a low of five, and mainly playing at the Royal Aberdeen Golf Club. He regularly skis in the French Alps with his family, goes salmon fishing in Iceland, Russia, and on a stretch of the River Dee that he owns. came last year when his chairmanship of the Aberdeen-based transport company FirstGroup ended somewhat ignominiously. The company had amassed debts of £2bn after borrowing to buy Laidlaw International, the parent iconic US coach company Greyhound in February 2007.

Gilbert said “We made a mistake clearly not funding that acquisition properly but we’re speaking about the biggest surface transport company in the UK and US, built from nothing.

I know FirstGroup has had a bit of difficulty but it’s still a great Scottish company. And, as you know, I wanted to do the rights issue two years ago, when Tim O’Toole took over as

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INTERVIEW

chief executive. The finance director at the time was adamant that would not be necessary. My mistake was that I didn’t push hard enough for that.”

In July last year, 23% of FirstGroup’s shareholders voted against the reappointment of Gilbert as chairman and 29% voted against the remuneration report. He said, “Quite rightly they were pretty annoyed.”

Aberdeen owes its strong position in emerging market equities to a far-sighted decision taken in the early 1990s. The firm’s Far East equities fund management team, led by Hugh Young who joined Aberdeen as part of its acquisition of Sentinel Asset Management in 1988, decamped to Singapore in 1992. As the Asian Tigers started to roar, Young and his team had a ringside seat, and were much better placed to spot companies with strong growth potential and emerging regional trends.

Asked why the office relocated to Singapore, as opposed to the more obvious regional hub of Hong Kong, Young said: “It was quieter, more thoughtful and longer term. It was a place where we could make plans for the next 10-20 years, which mirrors how we invest.”

One senior City source said: “Martin was early to see the opportunities in Asia and gave his fund managers the freedom and flexibility to build an enduring business there.” Gilbert is fulsome in his praise of Young, describing him as “the Warren Buffett of Asia”. He added: “as head of equities, Hugh made the company what it is today. He just buys stuff and holds it. He doesn’t panic. He is really a bottom-up fund manager, a stock picker. He finds macroeconomics irrelevant, preferring to concentrate on the companies. Hugh has been my friend and the guy I’ve relied on throughout my career to manage the money.”

Young is one of three senior managers at Aberdeen who have worked alongside Gilbert since the 1980s. Like Gilbert, the other two were educated at Robert Gordon’s College in Aberdeen – finance director Bill Rattray and deputy chief executive Andrew Laing. Gilbert said that the other two “deserve as much credit for what has been achieved as I do.”

Gilbert added: “The only thing I’ve learnt from my asset management career is that when everyone’s negative on something buy it, and when everyone’s positive, sell it! n

BUSINESS QUARTER | SPRING 14

COMMERCIAL PROPERTY

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Property prices rise as confidence returns, £250m project will aid rail freight expansion, restaurant chain Giraffe reaches new heights, cancer-battling biotech company moves into new premises >> Price recovery continues Prime property prices in Scotland increased by 0.3% in Q4 2013, the second consecutive quarter of price growth, according to Knight Frank’s Prime Scottish Property Index.

The strong second half of the year means prices for Scotland’s best properties have risen by 1.6% on an annual basis. However, prices remain 24% below the market peak in Q4 2007.

Price performance in the final quarter of the year was mixed across Scotland. Prices rose or were unchanged during the quarter in six out of the seven main Scottish regions, with a 1.3% rise in the Central region the biggest increase.

The analysis of market activity over the final three months of 2013 confirms a more positive picture has emerged, with the number of sales agreed during the quarter 10% higher than the comparable period last year. The number of individuals registering their interest in purchasing a prime property in Scotland was up by over 50% over the same period, as were the number of viewings conducted.

In 2013, the appetite among buyers for sub£1m homes in key regional towns was strong and increased activity from buyers has had a knock-on effect on prices at this level. Indeed, sub-£1m homes increased in value by 1.8% in the fourth quarter, outperforming the wider prime market.

Ran Morgan, head of Knight Frank’s Scottish residential department, said: “As evidenced by rising prices and an increase in transactions, the second half of 2013 has marked the start of a turnaround in fortunes for the prime Scottish country house market.

“It is encouraging to see that this recovery is taking place in rural as well as urban areas.

Rising prices across almost all the regions is reflective of the more positive mood we have seen among both buyers and vendors.

“The coming year is likely to throw up its own unique challenges, with the referendum on independence scheduled to take place

BUSINESS QUARTER | SPRING 14

in September. We remain confident that the recovery in transactions and prices seen during the second half of the year will carry on into 2014 as the Scottish economy continues to strengthen.”

According to the Knight Frank/Markit House Price Sentiment Index, households in Scotland are more confident that the price of their property will rise over the next 12 months than at any time since April 2010.

It’s encouraging to see the recovery taking place in rural as well as urban areas >> Shepherd gathers praise Estates Gazette has recognised Shepherd Chartered Surveyors as one of the top commercial firms in Scotland for the second year running.

In its annual analysis of Scotland’s commercial surveying market, the publication noted that ‘it was another strong all-round showing from regional specialist Shepherd Commercial, which only broke into the top rankings in 2012 and impressed again in 2013, most notably in retail where it pushed C&W particularly close.’

Shepherd was ranked second in the retail property category; third in both the office and industrial categories and fifth in the leisure and hotel category.

Chris Grinyer, managing partner at Shepherd’s Aberdeen office, said: “As this annual research into activity within Scotland’s commercial property market reveals, Shepherd is now a major player

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across all sectors. We’re delighted with this recognition and look forward to continuing to develop our business in Scotland.”

Meanwhile Shepherd has acquired the former Ballinluig Inn, south of Pitlochry, for an undisclosed price. The former Ballinluig Hotel, located just off the A9, is to be transformed into a kitchen, coffee house, bar and grill as well as an inn with eight bedrooms under the new brand name The Red Brolly Inn, run by the Fusion Group.

>> Building on success The Miller Group is continuing its recovery with revenues of £817.3m for 2013, with profits of £10.4m, and its former debt pile cut to £168.8m, down 16.4%. Miller Homes completed over 2,000 homes, up 12%, with turnover up 24%, while Miller Construction has increased its turnover to £408.7m with a forward order book of £1.8bn. Miller Developments strengthened its performance in Warrington and Aberdeen, while Miller Mining’s share of profits in Wales have fallen caused by a contraction of coal sales.

Chief executive Keith Miller said: “Miller Homes continues to benefit from increased demand, improving selling prices and a balanced sales mix, and is delivering increasing margins. In our Construction business we have taken the necessary steps to deal with the loss-making contracts. The business is now focused on frameworks and aligned to clients with long-term programmes of work.

Developments continue to perform well, underpinned by our longer term property assets. Mining has secured a full order book for 2014. The Board is confident that Group performance coupled with our strong financial base means we will continue to generate further value. This is a strong set of results which provides an excellent base from which to plan the next stage of Miller Group’s development.”

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COMMERCIAL PROPERTY

>> £250m project will support increase in demand for rail freight A new £250 million Railfreight Terminal in Bellshill, Central Scotland, will create a chance to open up new prospects for rail freight to and from Scotland. A planning application for the expansion of the existing Mossend Railhead and the development of the Railfreight Park was submitted in November 2013 to North Lanarkshire Council by site owners PD Stirling Ltd and joint venture partners the ID Meiklam Trust. A decision on the planning application is due in early summer 2014.

PD Stirling, founded in 1870 and operators of the existing Mossend Railhead, is expanding its operations to provide Scotland with a two-thirds increased capacity rail link to UK and European markets.

Mossend International Railfreight Park will comprise 200,000m2 of warehousing and manufacturing space adjacent to the terminal. It will house bespoke, carbon neutral distribution, service and logistics facilities allowing occupiers to load directly to and from the trains. Facilities will be built to meet market demand to accommodate a range of operators and building types with 4,900 jobs expected to be created through the development and operational phases of the project.

Rail freight has been increasing in popularity with supermarkets and material handling firms looking to transfer goods to and from Europe. The proposed Railfreight Park will support this growth with its capability to handle the new class of 775m long electric trains on a daily basis. As well as lowering distribution costs for occupiers, the development will help reduce carbon dioxide emissions by moving vehicles from road to rail. Construction is programmed to start in 2015 with phased development of the site through to 2030.

David Stirling, PD Stirling, said: “The investment opens up new opportunities for railfreight and sustainable low-carbon logistics in Scotland. Our proposals for the site will create a major new railfreight facility and help to secure new investment and economic activity both in Lanarkshire and across Scotland. The state-of-the-art facility will compete favourably on cost with road transport, extend choice and support the sustainable movement of goods to and from Scotland.”

>> Growth at the double CALA Group Limited, now the UK’s major upmarket home builder, has outlined details of its growth strategy in the South of England.

Alongside strong trading and a 16% growth in the value of its landbank, the strategy is part of the Group’s aim to more than double the size of its business by 2017.

Following a prolonged period of mixed trading conditions, the housing market showed tangible signs of improvement during 2013 which has continued into 2014.

During the period from 1 July 2013 to 31

January 2014, CALA has seen an increase in private reservations ahead of management’s expectations, generating an average weekly sales rate per site of 0.5 with little direct assistance from the Government’s Help to Buy scheme given the Group’s premium market positioning.

Alongside this, sales prices have strengthened with the average selling price for private reservations rising by 4.9% during the period to £361,000.

This positive trading performance during the first half of the current financial year gives the board every confidence that CALA will be able

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to report a strong, year-on-year improvement in its financial results for the full year to June 2014, building on the excellent performance recorded by the Group last year.

CALA has announced the launch of two new regional divisions to complement its existing operations in the South of England; the North Home Counties, encompassing Essex, Hertfordshire, Bedfordshire, Cambridgeshire and London Boroughs down to Zone 3, and; the Southern Home Counties, which includes North Kent, West Sussex, East Sussex, Hampshire, Surrey and South London Boroughs.

BUSINESS QUARTER | SPRING 14

COMMERCIAL PROPERTY

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>> Star performance The Stewart Milne Group has been awarded five-star status by the Home Builders Federation (HBF) for the third year running. The independent industry accolade for housebuilders recognises the 98% customer satisfaction rating achieved across Stewart Milne’s housing divisions in North and Central Scotland and Northwest England. The 2014 results were announced

by Housing Minister Kris Hopkins in Westminster, who handed plaques to the recipients of the prestigious five star customer satisfaction rating.

>> Giraffe reaches new high Restaurant and café chain Giraffe is the first occupier for 1 West Regent Street, the striking 143,000 sq ft Glasgow office due for completion in 2015. Giraffe, which has 51 outlets across the UK and Dubai but only one in Scotland (in Aberdeen), will operate from the 3,057 sq ft unit 2 on the ground level upon completion of construction.

Founded in 1998 by Juliette and Russel Joffe and Andrew Jacobs, Mr Joffe said: “We’re very excited that we’ve managed to secure such a fantastic and high profile corner unit and can’t wait to get started on our plans.”

We’re very excited to secure such a high-profile unit and can’t wait to get started >> Smart move for Fluid J Smart & Co. (Contractors) has made its first letting at Inchwood Park in Bathgate. Robbie Fluid Engineering Ltd has taken Units 4 & 5, totalling 446 sq m (4,800 sq.ft.). The company is a local business that continues to expand and was seeking good quality premises in a highly visible location.

BUSINESS QUARTER | SPRING 14

>> New home for cancer-battling biotech company Maxim Office Park at Eurocentral, has let the ground floor space within Maxim 1 to TC BioPharm. The biotechnology company has initially leased 5,000 sq ft on a ten-year lease following its announcement of a strategic collaboration with MEDINET, a Tokyo-listed immunecell therapy company, to develop a novel treatment for various types of cancer.

TCB will license MEDINET’s innovative, proven cell therapy product to progress clinical development of the new treatment in the UK and Europe. TCB will establish a brand new clean room, lab and administration facility which will become a Scottish hub for immuno-cell therapy research to benefit cancer patients in the UK and Europe.

Dr Michael Leek, chief executive of TCB, said: “We are one important step forward to our goal of treating cancer patients with novel cell therapy and I couldn’t be more satisfied with our new location at Maxim Office Park. We have been working closely with the Maxim team to identify the best property for our needs and I’m confident the modern space will benefit our new facility and also provide us with room to grow as our company flourishes.”

TCB’s move to Maxim Office Park represents significant inward investment for Scotland’s cell therapy industry. The company has been awarded a significant amount of assistance from the Scottish Government in the form of Regional Selective Assistance (RSA) funding to enable the creation of new highly skilled jobs, strategic input from Scottish Enterprise’s High Growth Start-Up Unit and funding of academic collaborations by Glasgow City Council.

Craig Ritchie, of Maxim Office Park, said: “It’s fantastic that Maxim is able to provide TCB with exactly the right facility for its scientific research needs. With flexible open plan units and a highly modern design, the space at Maxim lends itself particularly well to laboratories, as already evidenced by SEPA which took occupation of the 58,600 sq ft Maxim 6 building last year, allowing it to incorporate a first class laboratory facility alongside its office functions.

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SPRING 14

Wired and wonderful

Stephen Coomes was an engineering sales manager who set up his small Scottish business in 1978 – he is still at the helm today. Meantime, SDC Industries has built a reputation for designing and manufacturing energy efficiency and power supply products now going around the world. BQ Editor Kenny Kemp went to see him in East Kilbride The switchgear that keeps the lights and heating on – and vital life-support equipment whirring – is a critical part of our modern hospitals in Scotland. But they often need upgrading. When it comes to replacing and switching over a specialist electrical power system, a small firm in East Kilbride has the expertise to help keep everything running smoothly without missing a heartbeat.

SDC Industries is one of Scotland’s little industrial gems: a company where the knowledge and expertise of its founder Stephen Coomes is matched by the loyalty and commitment of the workforce. While the company has won Best Small Company in the Lanarkshire Business Excellence Awards and Best Green Business, it has been modestly minding its own business.

It is deeply heartening to know that companies, such as SDC Industries, tucked away neatly in the corner of a Lanarkshire industrial estate, still exist. They are the only power factor and voltage optimisation manufacturing company in Scotland – and have been the sole business in this field for the past 25 years.

This is a business where you can sense that a family spirit prevails and where long service is a factor in the company’s 36-year longevity.

In all those years, no one has ever been made redundant or paid-off. That’s quite an incredible position.

SDC Industries is owned and run by the quietly spoken and exceptionally polite Mr Coomes.

BUSINESS QUARTER | SPRING 14

Now in his 60s, he’s a modest and cautious businessman who has ploughed his own furrow. He is an engineer’s engineer to his bone marrow. He retains that wonderful sense of curiosity about how things work. He admits that even around his Lanarkshire home, he will repair a broken kettle or radio, fix a blocked pipe and even undertake minor car repairs.

He does, however, draw the line at dabbling in the complex mechanics of the commercial helicopter that he has flown since 1993.

“You look at something and you analyse how it is put together. Then you look at what you need to repair it when it goes wrong. And you just do it,” he says.

SDC Industries employs 25 people in East Kilbride with a turnover of £3.5 million and has recently taken on a new engineer and two electricians. This might appear modest by comparison to other major firms, yet it is

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a market leader in its sphere. “Our growth has never been meteoric. It has always been gradual. Over our history, we’ve had several recessions. It has plateaued and dipped and then grown again. We dipped during the recent recession but it is growing back again.

If I stay doing this for the next 10 years, I think we could get our turnover up to £10 million.

The reason it hasn’t been meteoric, is that it is my money. It has been hard enough to earn and I’m not going to risk it unduly. It is hard to earn and easy to lose.”

Stephen Coomes, in his quiet and measured way – with a touch of impish wit – has inspired his work colleagues to join him on his journey.

“The people I have are loyal and very hardworking. They have helped grow the business.

I feel a commitment to them,” he says.

How does he maintain his enthusiasm for his business?

“We are always busy here. There is no point in me being at work unless I do it well. There is no alternative. It’s not fair to anyone and I must do it to the best of my ability. We never forget that the customer pays everyone’s wages.”

Jacqueline McShane, the marketing manager, interjected and said that regular customers have come to expect Stephen Coomes’s involvement and a rub of his wealth of knowledge about power systems. He nods his head in agreement.

“People don’t just phone up and say: ‘We want one of those’. They phone up with a particular problem associated with electrical

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power, what do we do? Our advice is paramount to our sales, we offer a complete package. The product is where we make the money but we give the advice as part and parcel of our service. I believe a lot of companies don’t have the knowledge and they want the customer to take the risk from them.

We’ve taken that on our shoulders comfortably over the years.” he says.

Apart from hospitals, SDC Industries designs energy efficient schemes for new installations in factories, saw mills, various local authorities across the UK, the NHS in Edinburgh, Lanarkshire, Newcastle and Swindon, the Scottish prison Service and even Wynn’s Casino in Las Vegas and the Old Bailey in London.

They advise the customer and if they accept what SDC says, they are sold the equipment, which is then installed by SDC’s technicians.

“It is our own design. Through the years

ENTREPRENEUR

we have amalgamated, modified and improved them. There are very few people who can have original thought in the sphere of electrical systems. I think it is a question of seeing how things are, how they can be fitted to what is needed, and modify them. That’s essentially what we do. We undertake all of our own electrical design now.”

So how did Mr Coomes create this business gem in East Kilbride?

“When I was at school I developed the hobby of repairing televisions and valves and then transistor radios. I started to get interested in engineering when people started throwing them out – and I could fix them.”

Born in Enfield, Steven came up to Scotland with his parents, via Sheffield. He attended the red sandstone Spier’s School in Beith in North Ayrshire, now defunct, whose motto was ‘What is true is right’.

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In the early 1970s, he was accepted at Strathclyde University studying for an electrical and electronics degree.

“I went to get the qualification to get a job. I think if I had gone in later years I would have got a lot more out of it intellectually,” he said.

But his enthusiasm for engineering – which he still maintains – was sated by his time in Glasgow. In his fourth year, he specialised in electronics, although he has ended up as an electrical engineer.

“Electrical engineering has not changed as rapidly as electronics but heavy electrical power is needed to operate everything in life. Over the years it has changed, but not dramatically.

I’m very pleased I chose this path now.”

As a future graduate, he wanted two things: a car and an expense account. So he applied for sales jobs with big companies on the graduate milk run. >>

BUSINESS QUARTER | SPRING 14

ENTREPRENEUR “I’d had old bangers all the way through university which I had to fix. I remember lying on the hill at Rottenrow, where you could park, underneath my car, trying to fix it because it wouldn’t start. I had an old Ford Classic and then an Austin Westminster, with its leather upholstery.”

“As soon as I graduated, I said I’ve had enough of this, I wanted a car provided. So I got a job with BICC [British Insulated Callender’s Cables, and now part of Balfour Beatty], the largest cable making-company in the world.”

As a graduate trainee, he moved to Wrexham to work in the power cable division, manufacturing 11kb cables, where he was on the management sales programme. Like so many of these Great British businesses, it was a solid learning ground. And he also got his new car too.

“This started me off on the road to where we are now as a business. BICC was a phenomenal company with factories all over the world. Back then, I was told that people are the most important asset that any company has. When I look at some large companies today, I wonder if they subscribe to that view.”

He undertook day-release to Liverpool Polytechnic, completing a diploma in management studies, which also took him to management courses in France and Belgium. It was on that sought-after expense account that he first got his glimpses of Paris and Brussels.

“They educated me and made me feel I was going places. This was a whole different world for me. My upbringing hadn’t been poor, but my parents certainly didn’t have a lot of money to lavish about.”

However, Stephen Coomes witnessed firsthand a root cause of Britain’s industrial decline.

“Looking back, it really shows me how much business has changed over the years, because when I was taken on in sales, I went out with the existing sales engineers in Birmingham.

One guy, called ‘The Trainer’, would sit in the office in the morning and wait for the phone to ring. There was no pre-planning or proactive sales pitch. Then, at lunch, he took us to the pub. Every lunchtime we ended up in the pub for several hours. It is different days now.”

He showed promise and was transferred to Leicester selling a whole range of general cables, with wholesalers, and manufacturers

BUSINESS QUARTER | SPRING 14

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such as Marshall Amplifiers, the essential backline gear for any self-respecting rock band.

“Marshall Amps have done very well. It shows that if you’ve got a product in a niche market that becomes the best, then it builds a longterm value.”

He continued with BICC in computer stock control in Prescott, finished off his management diploma in Leicester, then moved to Stevenage as a qualified sales manager, where he was given sales targets.

“I was young and didn’t have the confidence I have now. I was all right with sales but I didn’t set the heather alight,” he admits.

In 1975, he was given the opportunity to become a capacitor sales engineer, which was a step up the ladder, and a job in Glasgow, based in Helen Street, now an ASDA store.

By now, he had married first wife, May, and they were able to move to a modern detached house in Lanark. Life was good.

“My beat included the National Coal Board, and British Steel at Ravenscraig. I went down many Scottish mines to look at their electrical cabling and work out their requirements. I was selling energy-saving capacitors which brought me on to what we are doing now with SDC,” he says.

Then BICC delivered a shock: they decided to amalgamate two sales forces and asked Stephen Coomes to re-apply for his job.

“There were three people for two jobs, and they interviewed me for my own job and that really upset me. I thought I was being groomed for bigger and better things.

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I thought ‘blow this’ and I left.”

In 1977, he left, confident he would get a job.

“We sold our house in Lanark and May and I bought an old nursery at Overtown, Wishaw, that was rundown at the time. The Good Life was on the telly,” he laughs. “We thought we’d try doing this and grow raspberries and damsons.”

But money was tight. He was approached

by Rectiphase, a capacitor components competitor, and part of Schneider group, who offered him a job as an agent for its brand.

“I wasn’t making much growing things. I took on the job as an agent and it was quite traumatic because there was no money coming in. I had to sell to survive and that’s the way it has been ever since.”

He worked with Rectiphase until 1988 and was the top sales performer, earning reasonable money on commission. Unfortunately, the rasps and damsons were turned into lawn.

Stephen worked as an agent, while May answered telephone enquiries and helped with the invoicing in what became SDC Industries.

“It started to take off and it was good. We became SDC Industries and then made it a limited company in 1988, moving to East Kilbride.”

He moved over to work with ABB, the merged Asea and Brown Boveri, and SDC began manufacturing their own capacitors and products, using basic components. This was the Power Factor Correction Capacitor, the bedrock of the business today. These are high voltage capacitors which have been

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installed in electrical installations around the world. At times, Steven Coomes was making the products and then going out and installing them.

“I remember doing a job for Tate & Lyle when they had a sugar refinery at Greenock and we promised the factory would not be off-line for electricity. We had to work all day and night through the weekend to ensure its installation on time,” he says.

Working with ABB was mutually beneficial and the Powerfactor Correction Capacitor was doing well while other products were added to the range. The company was growing, required bigger premises, and started taking on electrical engineering recruits such as David Sullivan, the technical manager, who is a key part of the team. Peter Higgins, the production manager, who is responsible for assembly, joined 18 years ago. Most of the team is long-serving with many nearly 20 years with the firm. While Jacqueline McShane, head of administration and marketing, has been with the company for 11 years.

East Kilbride Development Corporation sold them the ground lease and a 7,000 sq ft factory, which has been a boon, because it later allowed SDC to double its size, adding another factory building.

“It was a good move buying the ground lease and the land next to us. It has given us the room to expand. We’ve now plenty of room to develop our factories and do more. We have limited machine tools because most of our work is in assembly. Our expertise is in putting together all the components in a

ENTREPRENEUR

safe and effective way. We make some of the components ourselves. In our market, to compete against China, you have to be in a niche market with a high technical content and knowledge. In terms of manufacturing costs, China is cheaper but we normally buy our components from North America and the EU.” “The modern products are concerned with voltage optimisation. Back in 1988 the average value of order was £5,000 and now it is £100,000. We do some really big jobs.”

SDC’s clients are national and international with a customer list that most engineering businesses would die for. Many are repeat customers since 1978.

“For example, the Tullis Russell paper mill has just put in a new power station to get energy from renewable wind sources and they needed an upgrade of their power factor correction systems. So they gave us the order.”

“We have customers of 30 years standing but we’re also gaining new customers too. We are well aware we have to keep finding new customers all the time. We have been reducing carbon emissions for 30-odd years but it hasn’t been the flavour of the month until the past five years. To try and get people to buy our products in the early days because they were greener and cleaner, well, that was unheard of!” he says.

Power Factor Correction does reduce Co2 emissions, but few people were interested until a few years ago.

His only blip was starting a manufacturing company in Kingussie. They began manufacturing transformers in Scotland and

We have been reducing carbon emissions for 30-odd years, but it hasn’t been flavour of the month until the past five years

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won some orders but he found it difficult getting the right people working in this Highland factory.

“The transformer is a basic building block and the UK imports a lot of them. We got some reasonable orders. We were ahead of the time and found it hard to give the workforce enough work, so in the end we decided to shut. If we’d been a year or two later it would have been a lot better.”

The closure of the Kingussie factory was a hiccough, but Stephen kept his spirits up by concentrating on re-organising the East Kilbride factory. With his wife, Valerie, who is the managing director of her own fencing company in Hamilton, the household talk often turned to their shared business interests.

“My wife Valerie runs her own successful business. She shares my understanding of how business operates, and together we try to work out the way to find the solution to common, everyday work problems,” he says.

Stephen Coomes is positive about the assistance he has received from Scottish Enterprise, who have helped in specialised areas of exporting and in marketing, such as the development of the website. In 2014, 20% of SDC’s work was being exported from Scotland.

“Scottish Enterprise have liaised very closely with us over a number of years,” he says.

For about 15 years, the company has exported to Africa, including Ghana, and the Philippines.

There are tremendous opportunities for us to export more, but we need to take on an export sales manager. The costs associated with that have made me slow down on this route.”

So what does he reckon on small engineering companies in Scotland?

“What I can’t understand is that there are thousands of smaller engineering companies in Germany. Yes, there are certain small differences between our countries, but if the Germans can do it, there is no reason why it can’t be done in Scotland. Engineering is the fundamental building block for everything.

I think here we think doing the dirty jobs is a bit beneath us, which it is not.”

Stephen Coomes remains familiar to many in Scotland’s electrical industry, but he has quietly and methodically built a great business that is wired for success. n

BUSINESS QUARTER | SPRING 14

BUSINESS LUNCH

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wining and dining with the Dean

Professor Susan Hart is author of several books, over 100 learned papers on international marketing and is the down-to-earth Dean of the University of Strathclyde Business School. She found time for a spot of lunch with Jenny Hjul, our BQ interviewer, at Gamba, one of Glasgow’s finest seafood restaurants

When Susan Hart makes an entrance she looks much more the marketing guru she is sometimes described as than bluestocking. But while the red lipstick, red coat, shiny shoes and ready charm may suggest high flying executive, she has in fact spent most of her professional life in an ivory tower.

She was the youngest woman to be made a professor in Scotland, when in 1993 she was given a chair in marketing at Heriot-Watt University in Edinburgh, and has been Dean of the University of Strathclyde Business School since 2008, as well as a director of a number of international accreditation boards. She has taught on five continents and is in demand globally as a keynote speaker, a mentor, adviser, thinker and educator.

Yet Professor Hart wears her academic credentials lightly; she says her attention span is ‘seriously bad’ and paints herself as a plodder rather than an inspired intellectual.

‘Things didn’t come to me particularly easily at school,’ she says when we meet up at Glasgow’s Gamba seafood restaurant. ‘I was always OK, I was never a genius, I was never a straight ‘A’ student, I had to work and I just got used to it.’

But she ended up in such a scholarly calling.

How did that happen?

‘I guess I’m competitive,’ she says. ‘I didn’t want to be at the bottom of the class... I didn’t want to be best – I wasn’t that

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competitive – but I was sure as hell I didn’t want to be worst.’

Academia might not have been a planned career path, but within a few years of graduating from Strathclyde University in French and Marketing she found herself back there, working on her PhD. Although I’ve just met her, I suspect the seat of learning is very much her natural habitat. I mention ‘product deletion’, the focus of her doctoral research, only to show I’ve done my research, but it’s like lighting the touch paper and she is off, warming to her marketing theme.

‘What I found in my PhD (and I’d love to go back to this) is there’s often a delay between the decision to delete a product and the actual fact of deletion.’

Soon she is on to what makes a product international, and ketchup and mustard, not that she has even thought about lunch yet. She devours marketing books and talks animatedly about Malcolm Gladwell’s What the Dog Saw. Such reading is ‘restful’, says

Susan, ‘because it gets you off the track you are on’, though she does read fiction too and was enjoying J.K Rowling’s The Casual Vacancy before she left it behind in a hotel room on one of her many trips abroad.

Gamba, in a quiet basement on West George Street, is filling up with business suits but there is an unhurried calm, both in the discreet service and at our corner table. When the waitress arrives Susan hasn’t looked at the menu but is marvelling about her students and the way they express themselves.

‘The speed with which they scan data and get, from pages of internet content, what they need, and understand that the rest they don’t need – it’s brain processing – is far faster than us.’

She agrees with the common lament among the older generation that students’ writing skills may not be what they once were, but poses the interesting question, ‘what do writing skills tell us about people?’

‘In another 20 years they’ll be the leaders >>

I guess I’m competitive. I didn’t want to be at the bottom of the class... I didn’t want to be best – I wasn’t that competitive – but I was sure as hell I didn’t want to be worst

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BUSINESS LUNCH and writing skills won’t have the kudos that you and I give them and should they have the kudos?’

But it was writing to a certain extent that propelled Susan’s career forward, and she is the author or more than 100 articles and papers, numerous books and publications.

She is modest though, and attributes her success to her teachers.

‘I owe my career to two people…one was my first PhD supervisor, a Greek guy who is now the professor of marketing at the Athens School of Economics and Business Science. He taught me a great deal about the academic research process and I worked with him for two years on the deletion process. So he gave me a passion for that kind of enquiry that hadn’t really occurred to me.

‘But the person who really helped me with my career was Michael Baker and he was the founding professor of marketing at Strathclyde University. He just put me into situations that I would never have put myself into.’

She found herself at the age of 29 giving lectures to managers in their 40s. ‘I just used to die inside but I would steel myself to it and I would do it and, hey, I did okay. Michael kept putting good opportunities in front of me and when I would hesitate he’d encourage me.’

By now the wine waiter is hovering and, in the interests of restaurant reviewing I order a glass of the house white, a South African Chenin Blanc from Paarl in the Western Cape. Susan joins me and I wonder if a bottle would be appropriate. We could always have a second glass, I offer.

‘No, we could not,’ she laughs, ‘I have to work this afternoon.’ It’s not that hard to imagine the professor, softly spoken and convivial as she is, at the lectern in complete command

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of her postgraduates. She still teaches a few classes on Strathclyde’s esteemed MBA course (the university receives top rankings from the Economist and the Financial Times) but her job is mostly managerial these days, and it often takes her away from Glasgow. While being Dean is her ‘vertical responsibility’, internationalisation is her ‘horizontal responsibility’ and it’s a subject she returns to regularly over lunch.

She has just been re-elected to the board of the Association to Advance Collegiate Schools of Business (AACSB) and also sits on the European Advisory Committee and Accreditation Panel for AACSB, as well as taking on directorships outside her field – the RSNO until recently and now Yorkhill Children’s Hospital. Management has brought challenges of its own, she admits, and she has had coaching to learn how to motivate people.

‘I think you can get fairly far into academia

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without having to manage people…you might have a research team but it’s usually quite a small team. You are very autonomous. In industry and commercial situations with bigger teams it’s not what you do but how you do it that makes a difference. When I started paying attention to how I did things I was aware that I hadn’t paid attention to that and I needed to.

And in order to accelerate the process I drafted in help.’

Susan says she also took classes in public speaking, many years ago, although a lot of it was ‘self-help’, watching videos of herself.

‘I would sit in a darkened room. It’s horrible, you see all your habits and irritating mannerisms. I think I concentrate more on the material now. I know how to project my voice, I’ve learnt to do that over the years and I don’t have to consciously think about it now.

I probably still have my irritating mannerisms.

I speak too fast always.’

More recently, she has picked up breathing techniques from singing classes, which she embarked on because she wanted to be able to stand up and deliver a song (‘it’s not a done job’).

I put it to her that it’s a particularly female trait to acknowledge your shortcomings and try to rectify them, but she plays down gender imbalances in the business world. She wrote an article for the Financial Times last November about perceptions of the MBA as a male preserve, and while she says ‘we’re a long

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way from fifty-fifty’ on any of the boards or committees she sits on, her experience has not been woman-unfriendly, either in academic circles or in her extensive links to the corporate community.

‘I do think there are personality types that don’t necessarily align with gender. I think you can get many very clear, rather loud, rather focused women and some guys in the classes that I teach who are more reticent. I think if we hide behind gender stereotypes we miss the subtleties in what we really need to do in terms of educating a generation of future leaders, which is teaching the value of lots of different perspectives on a problem. So if you have a quiet person – let’s forget their gender – you need to find a way of allowing that quiet person to speak.’

She does accept that child care, or the lack of it, can hold back women’s careers, although university gave her flexibility when her daughter and son, now 21 and 16, were growing up. She had a nanny but could be home to cook their tea, do their homework with them and put them to bed, after which she would return to her books.

Rearing children has kept Susan in Scotland but with that ‘coming to an end soonish’, would she consider offers outside this country?

‘Oh definitely. It has to be for the right challenge, that’s what would drive me. I don’t want to name schools because then they’d think, oh God, she’s going to phone us! There are a few schools in the wider UK that I think are very good schools that could be stretched a bit further and that’s also true of some locations internationally. At the moment there are lots of possibilities and I haven’t got to the stage of thinking which ones I want to pursue.’

Is she head-hunted on a regular basis then?

Yes, she says, I think everyone is. (I assure her this isn’t the case.) Before she leaves for her three o’clock meeting, her fifth (excluding lunch) in a day that began at her desk at 8am and will probably end in the gym. She says her dream job is somewhere she could make a difference. How about politics?

‘I’m not nearly talented enough. When I listen to politicians they amaze me at how adept they are at thinking on their feet (which I’m terrible at), at how articulate they are.

I’m an addict of the Today programme…

BUSINESS LUNCH

Gamba: A haven of flavour in the city Gamba is an award winning restaurant in Glasgow’s city centre. It specialises in simple seafood cooking and prides itself on using fish direct from sustainable stocks. Run by Derek Marshall, it has a loyal and loving clientele, judging from the superlatives (‘lip-smacking’, ‘superb’, ‘mouth-watering’) on its website.

The lunch menu is £18 for two courses and wine starts at £21 for a bottle (£6 a glass) of the Lowry’s Pass 2013 Chenin Blanc from South Africa (light, crisp and quaffable), and goes up to £99 for a Puligny Montrachet 2010 (maybe next time).

For her starter, Susan chose the crayfish, prawn and pear cocktail with spiced Marie Rose sauce which, she said, wasn’t too creamy and ‘had a nice kick to it’.

I had Gamba’s fish soup with Portland crabmeat, stem ginger and coriander, flavoursome and faultless.

This was followed by crisp fried sea bream with shrimp, piquant peppers and lentil salad for Susan (served without goat cheese at her request) and though she said the bream had ‘nice crispy skin’ and the peppers were pleasantly piquant, she confessed she ‘could have done with some carbs’.

I opted for the roasted Loch Duart salmon with orange teriyaki, fragrant rice and wasabi, which was dark and delicious, with a cloying citrus sweetness.

The servings were generous, or perhaps we just talked too much, but the little side dish of broccoli was not really needed. As it was whisked away, Susan summed it up as ‘nice and green with the promise of a crunchiness that did not deliver’.

We passed on the puddings but could have indulged in cherry bakewell with vanilla ice cream, rosemary crème brulee, honeycomb ice cream and chocolate sauce, or Mull cheddar. As it was, the bill came to around £55, a drop in the ocean for such high-class cuisine.

Gamba Restaurant, 225 West George Street, Glasgow, G2 2ND.

Boris Johnson was on this morning and I was just amazed. I do think what I ended up doing fitted very well with my strengths and weaknesses.’

She firmly believes that whatever the outcome of the independence referendum in September, her job is to promote Strathclyde as an international school.

‘We want to serve the Scottish community

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but we are an international school with nine other centres and all my students there are important and the communities that they feed are also important.’

But is she in the Yes or the No camp? ‘As the leader of a big institution I have to consider the impact of both results,’ she says, bringing that line of enquiry to a swift close. Academia’s gain is politics’ loss. n

BUSINESS QUARTER | SPRING 14

BOYD ON WINE

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An upbeat banker with a Rose outlook

At last Kevin Boyd, of Santander Corporate & Commercial Banking, is able to put his time spent sampling fine wine in the vineyards of France to great use in Scotland When I told my 21-year-old son that I was doing a wine review for BQ Magazine, he thought it was one of the funniest things he’d ever heard. He laughed like a drain, not at the thought that I’d be writing an article for such a fine business magazine as BQ, but more that I’d be capable of drinking wine without falling asleep in front of the TV. In my defence, working extremely hard at building such a successful, fast-growth business in Scotland as Santander Corporate & Commercial Bank is a hard but hugely rewarding job. So, it’s the hard work that occasionally makes me a little sleepy, not the wine (honest).

As a Christmas present, my wife Gill treated me/herself to a long weekend at a vineyard in France. It’s one of these things where you ‘rent’ a row of vines, but in reality just get the opportunity to

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buy some wine at cost price along with a nice tour of the vineyard. To decide which vineyard we visit, we have three different reds to choose from. Sampling wines for BQ gave me a chance to practise.

I picked up the wines on Thursday but resisted the temptation to try them there and then, deciding that a weekend over some dinner was probably the mature thing to do. We had two bottles, both French, a rose champagne from Pascal Poudras and a red from Domaine Gallety, a wine from Vivarais which (I’m told) is on the other side of the Rhone to the more famous Cotes du Rhone.

I’m no champagne fan and definitely no connoisseur, so my first dilemma was what do you eat with champagne? I wasn’t

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feeling enthusiastic about Google’s suggestions of oysters, mushrooms or BBQ chicken sandwiches (I kid you not), so the easiest solution was for Gill and I to have it on its own as an aperitif.

This turned out to be an ideal way to enjoy what was an excellent wine. The first sip got an exclamation from Gill of “oh that’s delicious”, which is praise indeed from a lifelong champagne dodger and gin lover. It’s hard to describe the sensation, but it seemed to melt on the tongue and was one of the smoothest and most delicately flavoured champagnes I’ve tasted. Often champagne can leave you reaching for the Gaviscon, but Pascal Poudras had none of that unpleasant acidity and we raced through the bottle at a pace.

Have I discovered a ‘session’ champagne?

That set me up nicely to prepare dinner to go with the red, which I’d been told to open at least an hour before drinking and which “as a 2011 vintage can apparently be drunk faster than a 2010 vintage”. I wasn’t sure if that meant I had to neck the bottle in one go, but decided that would just be silly. So, an hour later and with a home-made spicy stir fry to hand, we had our first glass of the red. It was unmistakably old world, deep with lots of character and in no way overpowered by the chillies I put in the food. It dries the mouth out – tannin my wino friends tell me – and without sounding like I know what I’m talking about, it definitely needs food to go with. Overall, I would recommend the champagne if you want good quality but not astronomical prices. The red is good, but would probably get better with age and if you’re anything like me, that’s not going to happen to any wine in my house. n

Kevin Boyd is divisional managing director of Santander Corporate & Commercial Banking, in Glasgow.

Thanks for the Balmoral Hotel in Edinburgh for its selection and advice on wines and allowing us to take photographs. These wines are available from Wildflower Wines: Contact Christian Albuisson on 07767687368. Domaine Gallety is £17.50 a bottle. Champagne Pascal Poudras Rosé: £24.50 a bottle

run Sunderland Be Part of the action on Bank holiday weekend

sunderlandcity

HalF

3 runners 1 team 13.1 miles

take on the challenge with your friends, family or work colleagues!

enter now. may 4th 2014.

sunderlandcity10k.com

MOTORING

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can infiniti go beyond rivals?

BUSINESS QUARTER | SPRING 14

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MOTORING

Greig McKnight, a partner at chartered accountants Campbell Dallas LLP, is impressed with the Infiniti Q50 but wonders if it has enough of an edge to overtake its competitors in the luxury car market >>

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BUSINESS QUARTER | SPRING 14

MOTORING

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I’d read a few articles about Infiniti recently and so when I was asked to test drive the latest offering, the Q50, I was interested to see just how the car would shape up against the established competition in the executive saloon category.

The Q50 is a striking looking car, though more so from the front than the rear and is slightly longer than its rivals the BMW 3 series, Audi A4 and Mercedes C class.

As well as the handsome exterior the interior is very well finished and the Q50 shows no evidence of being a relation of its parent company Nissan. The broad leather seats are comfortable and it was easy to find a suitable driving position. Another feature is the two large touch screens, one for sat nav and another that controls the myriad

functions available and will do everything from memorising your seat position to your preferred temperature. The screen also delivers the feed from the excellent all round parking cameras.

An interesting feature was Infiniti’s Direct Adaptive steering system which entirely decouples the steering wheel from the steering rack and tyres. Instead sensors ‘interpret’ the action you put on the steering wheel and apply this to the wheels electronically rather than through the steering rack. Though, reassuringly, this is still on the car as a fail safe. The feel of the steering alters depending on the car and takes a while and gives less feedback through the steering wheel.

The version I drove was the Q50 Hybrid that has a powerful 3.5 lire V6 petrol engine

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but also has electric power that automatically kicks as dictated by the on board computer.

This takes a little getting used to and the car can feel a little unresponsive when running on electric power at low speeds but once you put your foot down you really feel the power of the V6. As you’d expect for a car of this type it felt more suited to long cruise and motorway driving. The cameras find the lane markings and the automated steering will nudge the car into the middle of your motorway lane unless you’re indicating out of it. All in all it was an impressive car and it will be interesting to see how it establishes itself in the market against such notable competitors. n

The car Greig drove was Infiniti Q50S Hybrid AWD. On the road price – £48,175.

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Thanks to Jason Blane and his team at Infiniti Centre Glasgow, 4 Braille Crescent, Glasgow, PA4 0DJ.

As you’d expect from a car of this type, it felt more suited to long cruise and motorway driving

EQUIPMENT

BUSINESS QUARTER | SPRING 14

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EQUIPMENT what a gem of an idea

Diamonds may be forever, but they’re not so rare now that that scientists have discovered how to ‘grow’ them in a laboratory >>

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EQUIPMENT

This isn’t fiction. A retired American army officer visits Moscow to buy a security device, but while he’s there a scientist, Dr. Boris Feigelson, takes him aside to show him blueprints for something else, something developed for the Soviet space programme: a tumble-dryer-sized device that makes diamonds. General Carter Clarke cannot believe his eyes, and buys three, ships them to America and founds Gemesis Cultured Diamonds.

The process was deceptively simple: take a seed, a slither of carbon material and put it into a chamber; add varying amounts of gases, including a carbon source, into the chamber; heat to a very high temperature to produce a plasma, in which the gases break down and carbon molecules attach themselves to the seed, causing it to grow; let your CVD, or Chemical Vapour

Deposition, simmer for a few days to a few weeks; remove gases; remove the now larger seed from the chamber and crack it open. There lies a diamond, chemically identical to diamonds out of the ground, as court cases have had to underline.

That initial process had a problem though: as a consequence of the nitrogen content of the gases used, it could only produce Coloured diamonds - canary yellows, sometimes lavenders and pinks. If that could be called a problem - after all, in nature coloured diamonds are rarer than the white variety.

But now that has been overcome. Last year Gemesis made a leap forward, by producing the largest, whitest, lab-created emerald-cut diamond to date. Washington Diamonds, another leading ‘diamond grower’, has recently produced a white,

Every lab-made diamond has one characteristic lauded in mined diamonds - each is flawless.

Unsurprisingly, the powerful companies that make their money from mined diamonds have been less than supportive of the idea

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EQUIPMENT carat-sized stone too and claims to be months away from two carat stones.

“And that makes it a milestone,” says Clive Hill, Washington Diamonds’ CEO. “A lot of people in the diamond industry have been keen to view such lab-grown diamonds as marginal. But this stone cannot be ignored.”

More than that, every lab-made diamond has one characteristic lauded in mined diamonds: each is flawless. Furthermore, each is around 25% the cost of mined equivalents. Lab-made diamonds have none of the environmental impact of mined diamonds, nor are associated with devastating African wars, and, unsurprisingly, the powerful companies that make their money from mined diamonds have been less than supportive of the idea.

Indeed, might that be it for the aura with which we have imbued a substance which, bar a small twist of chemistry - carbon atoms connecting in super-strong, ultra-hard 3d bonds rather than in layers - is little different from the soft graphite in your pencil? Neil Duttson, of ethical diamond dealers Duttson Rocks, says: “Despite some fear in the industry that lab-made diamonds will somehow take over, they are just different - a different product for a different customer,” says Duttson.

Over time, there is likely to be increased acceptance of the labmade variety: there was similar resistance to cultured pearls when they were first created, and now they, not deep-dive pearls, account for the vast majority of all pearls sold. Coloured gemstones have long been lab-made by similar processes as those now being turned on diamonds; in fact, so extremely rare are large emeralds, for example, that they would be too expensive to sell - most sold have come out of the lab.

In the short term, the diamond market is expected to divide:

between shoppers for whom increasingly influential greenthinking or price is a leading consideration, and those for whom the emotional content of a mined diamond - the fact that it has been created by awe-inspiring natural forces over countless eons - remains important.

“The whole market is touchy about lab-made diamonds,” says Tom Chatham, of diamond makers Chatham. “Stores don’t buy lab-made ones because they don’t have to - yet. There is good supply of diamonds - for the moment. But [unless some yetto-be-devised technology makes the finding of and access to undiscovered diamond pipes feasible] we could be out of mined diamonds within 40 years.

But the debate over lab-made diamonds may be missing the point. What may prove of greater significance could be the application of diamonds in technology. According to Chatham, some billions of carats of softer, lower grade diamonds are already made each year for industrial purposes, their special properties making them ideal for cutting in particular. But, upgraded to the quality now feasible, white diamonds could also be used more readily in semi-conductors, optical devices, water purification systems, high-powered lasers and other electronics of tomorrow. Never mind the radical change to the world wrought by the silicon chip. The diamond chip could be key to making quantum computing a reality, with machines operating at speeds exponentially faster than currently.

Clive Hill says: “The potential for lab-made diamonds in applications are extremely exciting. I’d say that within a decade diamond products will be part of many of the technologies we use everyday. In fact, the very idea of what lab-grown diamonds’ use in technology could do gives me goose bumps. They could really change the world.” n

The whole market is touchy about lab-made diamonds. Stores don’t buy them because they don’t have to - yet. There is a good supply, for the moment, but we could be out of mined diamonds within 40 years

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FASHION

ies T BUSINESS QUARTER | SPRING 14

bind

g lon e b ar nce e i w ck es Pr e ’s n clud nedy a l l ne at in . Ken i r a th F . M oup ohn E of e gr d J s r n it are n el les a e W to a har C

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FASHION Maurizio Marinella may have good cause to bemoan the decline in tie wearing and the devastation wrought to those colourful if functionless strips of silk that has come about through the casualisation of the male wardrobe. He is no fan of dress-down Fridays either. “It’s true that there are more occasions for men not to wear a tie but there are still those occasions when a man should wear a tie to show respect,” he argues. “That might be for an important meeting or going to the theatre. Ultimately the tie isn’t just about dressing up - it’s a statement of respect.”

Marinella has spent a lot of time thinking about ties. After all, he is the owner of E. Marinella, the company established by his grandfather Eugenio in Naples - it celebrates its centenary next year - and is widely regarded as maker of the world’s best neckwear. Wearers become members of a kind of unspoken fraternity of

It seems that since the 1970s, our ties have been favoured by politicians in particular. I think they sit around talking to each about about ties at G8 summits

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power-players with a shared taste in a fine tie.

The Agnelli family - Italian industrialist owners of the Fiat Group - wore Marinelli. The Duke of Windsor and John F. Kennedy wore its ties.

More recently, so have Chirac, Gorbachev, Clinton, Sarkozy and Prince Charles, men of such renown that they don’t need first names.

“Of course, just the fact that they wear our ties is good credibility for the company - you may not like your prime minister, but if he chooses your ties that is some testament,” says Marinella. “We’ve been making ties for a long time but it seems that ever since the 1970s they have been favoured by politicians in particular - I think they sit around talking to each other about their ties at the G8 summits.” Indeed, a lucky break saw the organisers of the G7 in Naples in 1994 present each head of state with a box of six madeto-measure Marinella ties, kickstarting the association.

Certainly, what is perhaps more remarkable is that the company’s profile has grown through almost no effort on its own part. The Naples shop - where the company started out, only in recent years opening in Milan, Tokyo (where it was alone in offering shorter ties for smaller necks), Lugano and London - is just 20 sqm, but draws enough of the great and good to sell some $8m >>

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FASHION of a merchandise a year. It has never offered any kind of mail or internet ordering service.

You want a tie? You go to one of its shops.

Indeed, its high quality and tradition has, as Marinella points out, been a touchstone of pride for the city of Naples through some tough times.

“It’s a small company and has stayed small because my grandfather always wanted to devote his attention to just a few clients,” says Marinella. “We’ve always preferred face to face

sales, which is more intimate and personal. He always opened the shop at 6.30am every day in person and I’ve followed that tradition.

The customer becomes part of the family.”

But what exactly does such a customer get for his £150 or more? And that’s for one tie, by the way. Marinella stresses that the family firm’s ties are all hand-made in Naples using English fabrics, folded seven times towards the inner to provide a luxurious density and lined by artisanal makers that require special

It’s a small company, and has stayed small.

We have always preferred face to face sales, which is more intimate and personal.

The customer becomes part of the family

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FASHION Only four ties are ever made of any one design.

People often don’t understand the workmanship that goes into making what can seem a very simple item

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training. Only four ties are ever made of any one design, so each is effectively unique to the customer. “People often don’t understand the level of workmanship that goes into making what can seem to be a very simple item,” Marinella suggests. “But the way it’s made is what gives the elegance in the end. You can tell a good tie from a less good one by looking at the knot. That’s where the balance of the tie is.

It supports the whole tie. It’s its heart. A good knot is a product of good silk, good linings and structure in making.”

For the man who does wear a tie, Marinella recommends a wardrobe of at least five key ties: one self-coloured dark blue, one with blue background and small white motif, one in regimental stripes (with dark blue as the main colour), one in lighter pastel hues, and one bright showy tie. Eugenio’s rule of thumb: light ties should be worn in the morning, dark ties in the evening.

The company is not all ties, however. It has since turned the same attention to detail in making other accessories, including shirts, shoes, small leathergoods, bags and fragrances.

But the heart of the company remains in ties.

As Marinella puts it, “the ties eat all the other items”. It is also why, for all that he worries about the lack of respect, he is not so worried that some men are putting their ties away.

“We also make more and more great scarves too now, for men and women,” he says. “They bring the same kind of colour and decoration to formal dressing. Perhaps scarves may become the new ties one day.” n

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INTERVIEW

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TV times

TVSquared is an ambitious start-up with global applications for advertisers. It has the heavyweight brains and talent of Calum Smeaton driving its future. BQ Scotland Editor Kenny Kemp caught up with the globe-trotting data entrepreneur who has moved from programs to programmes

Calum Smeaton has built a career making sense out of data. He was the co-founder and chief technical officer of Orbital Software, one of Scotland’s most exciting young tech companies in the late 1990s, which was listed on London Stock Exchange in 2000. For six years in the Noughties, he was chief executive officer of Sumerian at the forefront of the Big Data explosion. Now he has created TVSquared which has turned its attention to television advertising. Its strapline is simple: measure it, manage it.

When BQ caught up with him, Calum was in SOHO in New York in between meetings with some of the world’s biggest advertising agencies, before heading off to Silicon Valley and Los Angeles. TVSquared has developed an easy-to-use product that is very powerful, and inquisitive advertising executives in New York’s Park Avenue are sitting up and taking note.

His meeting in San Francisco is with an undisclosed major advertising house.

“We are looking at helping TV advertisers get the same level of insight and analytics as they currently get from all the other digital marketing, such as PPC [pay-per-click] and Facebook. If you advertise on these digital channels you know exactly who has clicked onto your links, you know how much they spend and what your return is on investment.

There is a lot of information to help optimise that investment. The problem with TV is that it is still in the Good Old Days where you are relying on knowing that 50% of the adverts work. It’s just wondering

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which 50% that works,” he says.

Global advertising was a massive $495 billion in 2012, having grown 3.8% from 2011, with the United States still the largest with $153 billion in advertising revenues. The bulk of this spend is still with local television advertising – which has held its ground despite doommongers predicting its demise.

TVSquared’s proposition is already opening doors with both advertising and agency clients in the UK, Australia, Singapore and across Europe. It was an acute lack of transparency and analysis about DRTV - direct response television - advertising which attracted Smeaton’s attention. And it was his former Orbital Software pal Kevin Dorren who first alerted him to a specific problem. Kevin’s company, Diet Chief, is one of Scotland’s fast growing ecommerce companies, helping thousands of customers lose weight. The company delivers a range of 80-chef prepared meals to your door with the exact number of calories in food you need to lose weight. Kevin was frustrated with how best to spend his limited budget on television advertising and

asked if there was anything that could be done to maximise the minimum spend.

Diet Chef launched a new television advertising campaign in 2012 and TVSquared undertook the number crunching to give Diet Chef the confidence to ramp up its spend and improve sales performance from the DRTV campaigns.

It was an instant success with dieters buying more pre-prepared meals.

Smeaton says: “This is a real problem for modern-day marketeers. Today’s marketing directors are very data driven. If you look at TV, you know it works, but you don’t get a lot of information to say why it’s working. And how you can better spend your money.”

A few years back, the television programme simply could stick a phone number at the bottom of the screen, which would give a feel for the kind of commercial activity. If the phone rings, then you can measure this response.

It’s been the bread-and-butter for the X-Factor, Britain’s Got Talent, and a host of big-ticket television shows. Today more businesses are pushing the responses from television advertising online, where it is >>

The problem with TV is that it is still in the Good Old Days where you are relying on knowing that 50% of the adverts work.

It’s just wondering which 50% that works

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INTERVIEW

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cheaper to go on the website to satisfy orders for buying products, goods and services.

“The move by television viewers to respond online rather than by phone has caused an issue for those who measure TV response.

It has been much harder to distinguish what has been driving that online response, such as email, Twitter or Facebook. What we’ve done is unlock all this and help work out when television is driving that response. By doing this, it allows us to tell television advertisers what is working,” he explains.

This means examining the channels, the programmes, and the segments of the programmes that are prompting a response.

This is also about the days of the week and times of the day. So advertisers, such as Diet Chef, can slice and dice their advertising spending to ensure they are hitting the best programmes for their products.

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“We can help them look at the best time.

We can say Fridays are really bad for you, but Sundays are a lot better on Channel 4, Sky Living, or Comedy Central, and within that we can tell you which part of Comedy Central works best. So is Friends a good show for you or Man v Food?”

TVSquared are also attempting to demolish some industry myths: such as how worthwhile is it to position during commercial breaks or is it better at the start of a programme. Again, the answer depends on the client and what it is selling.

“We can now provide data for all the things that were once loaded into a set of assumptions about how you buy television advertising.”

The advertising industry knows that brands have different times when they can make the maximum impact. Now finding that

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sweet spot is increasingly lucrative.

“What matters for a particular brand is the selection of the right time and day of the week and which channel is most appropriate.

We’ve found these are two keys that we use to unlock the value,” he says.

Then it’s down to the creative elements of the advert. Is it serious, stylish, funny, topical or deliberately obscure? This can be about variations of dialects, voices or even backdrop.

“In Scotland, one of our clients found an advert was off-the-chart, but no good for the rest of the UK. Knowing what works – and what doesn’t – is increasingly valuable.”

“We can give very fine grain information to understand firstly ‘A’, whether they are getting a return on investment. Answer, yes and no.

Then ‘B’ how do I use this information to optimise spend?”

For one client, TVSquared found out that 30 second ads were just as effective as oneminute adverts, which resulted in a massive saving in television spend.

“There was a very quick decision. Let’s just go with 30 second adverts. It’s that kind of information that allows our clients to spend on television, which is good, and makes it much more effective.”

Calum Smeaton, a computer science graduate of Heriot-Watt, now in his early forties, has always worked with data for different purposes. He now lives in the leafy West End of Glasgow and enjoys sailing yachts and, when he finds time off, kite-surfacing in Tiree and Portugal.

“What we realised was the whole Big Data movement was getting massive. There is a figure that 90% of the world’s data was created in the last few years. Along with this explosion of information there has had to be more sophisticated techniques to leverage insight from this wealth of data. Throughout my career I’ve been involved in companies that are looking to mine that information.”

TVSquared is a culmination of all this gathered experience over the last 20 years. “We’ve built a product and we’ve taken it out to the market, including large and smaller companies.

For example, universities have been blownaway by what we are showing them. This is not because we are experts in TV but we are experts in understanding how to get the best

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out of data and visualise it as well.”

TVSquared was set up in late 2011, when Kevin Dorren came up with his original query.

“We got a couple of guys looking into it in 2012. Then, in July 2012, we put money in to setting up the business. We felt this wasn’t just a problem for Kevin and that we had a reasonable solution. We got version one of the product ready by October 2012 and we had our first paying customers in the UK by November 2012.”

In June 2013, TVSquared won a Scottish Enterprise Scottish Edge award, one of ten out of 216 companies, which helped with a £50,000 kickstart. The company then picked up its first United States and Australian clients.

“We have a team in the UK. My personal focus is trying to get the US cracked. We’ve got some early partnerships and early customers in the US, but this is a massive market for a small company. It is ten times bigger than the UK.

television audiences.

BARB is funded by the BBC, Channel 4, Channel 5, the Institute of Practitioners in Advertising, ITV and Sky, while it commissions research companies such as Ipsos MORI, Kantar Media and RSMB to collect the data that represents the television viewing behaviour of the UK’s 26 million TV households.

Calum Smeaton is too diplomatic to criticise.

But it is fairly obvious that estimating viewing patterns across all TV households needs some updating. At present, a sample of around 5,000 homes using special metering automatic equipment works out the figures, from televisions, DVDs, and video recorders.

“The television industry still has the challenge.

The sample sizes used to make up the audience ratings are surprisingly low and it is only when you get into analysing them, that you realise how low they are,” he explains.

For years, it was simply assumed that the

For years, it was simply assumed X-Factor was watched by 12 million people, when the data was pretty much a blunderbus rather than a sniper’s bullet We are looking at how we scale this up and have a sales force in the US. It will be about leveraging the partnerships we have built.”

Is the data-capture similar to the work with Orbital and Sumerian?

“Yes, in terms of we are trying to get insight out of data. In terms of the techniques, it is very different because the technology has moved on. The way we build the technology is different and we use different stacks to build it. A lot of the models are very specific to the problems we are solving,” he says.

The similarity is in the presentation to users to allow them to visually understand, through charts and graphics, what is happening with their data. Over the years, the viewing figures have been sampled to come up with the figure that 18 million watch the Olympics or Strictly Come Dancing final. In the UK, the Broadcasters’ Audience Research Board (BARB) provides official viewing figures for UK

X-Factor was watched by 12 million people, when the statistical data was pretty much a blunderbus rather than a sniper’s bullet.

“There are some very old models being used in terms of calculating numbers. This doesn’t impact us too much because we are looking at responses on websites to television advertising.

Don’t get me wrong, BARB is a world leader, but it still has some challenges – and they are aware of that. If BARB and Nielsen say 12 million watch a programme, you are buying airtime on that calculation. What we want to know is how many people responded to your business, as a brand. That’s where we help.”

Some programmes might look ideal in terms of the right demographic, but TVSquared’s analytics have shown some less well-viewed shows can provoke a better response than the raw ratings might suggest.

“The disconnect between the ratings and the response is where we work best. What

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we will see is this area of ratings changing, especially with Twitter in this space, where viewers are talking about TV shows while they are watching them. The way that people are watching and engaging with TV will create a new way of measuring that viewing. The ratings will change as a result of that.”

Indeed, Neilsen is now providing social media analytics after partnering with Twitter.

Calum Smeaton says TVSquared is positioning for the future. Companies, such as Wonga, MoneySupermarket and GoCompare, might be web-driven but they need television exposure to get the reach.

“It’s not what we are doing today, but what we can enable tomorrow. The industry is going through changes. You hear Martin Sorrell of WPP talk frequently about ‘data-driven media trading’ in its broadest contexts. That’s really why we started the company because we could see - having looked at Wall Street trading platforms at Sumerian - that the way TV is traded is heading in this direction. No-one can predict when this is going to happen but we want to be part of that transformation.”

TVSquared, which has revenues of nearly £400,000, is expanding in Edinburgh, moving into a new office in Codebase, in Argyle House, the 11-floored former civil service office in Lady Lawson Street. Codebase, which began in Summerhall, is the new name for TechCube Management with 30 small firms building into an interesting high-tech cluster to rival Silicon Roundabout in London. Calum attracted funding from Kevin and Andrew Veitch, another Scottish entrepreneur and Diet Chef’s former marketing director, who have joined the team. David Connolly, who founded StarCom Media, and former commercial director with STV, is the commercial director.

“David’s been great. He understands TV, while we understand data.” Calum Smeaton is working again with Jo Kinsella in the United States, who joined him at Sumerian. Also in the team are Gillian Black, as UK business development manager, and Hew Bruce Gardyne, the chief technology officer and married to Genius bred guru, Lucinda, and Andrew De Quincey, the chief architect who developed Edinburgh Bus tracker app.

As they say in advertising circles, watch this space. n

BUSINESS QUARTER | SPRING 14

BIT OF A CHAT

with Jock Yuler

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more at the game including a kilted David Watt, the director of the IoD in Scotland.

Derek Stark, a former Scotland winger and Boroughmuir player is now adept at finding the planes to ferry the supporters to the big games.

I confess I never heard of the Slovakian charter airline GotoSky before. But the Rome trip was a very special one with its tartan, be-kilted fans hogging the cafes in the piazzas. And with a win to celebrate it was an early spring weekend to savour and remember. So move over Thomas Cook, and well done, Starky Tours. I’ll let you know Jock and his missus are saving up for the return trip in two years’ time.

>> New Chair is on song

>> Putting fun into Fridays

Glad to see Jayne-Anne Gadhia, the boss of Virgin Money, has now become chair of Scottish Business in the Community. A Big tick for this appointment. She’s taken over from Brendan Dick, of BT Scotland fame, who has done an excellent job steering the board and helping chief executive Jane Wood build the team in Scotland. Not many people know this, but Jayne-Anne loves a sing-song, so can we expect to see her leading a ‘Community’ sing-song around a piano at some future SBC event?

Glasgow-based Metis Partners, who help companies with intellectual property strategy, like a good laugh.

Stephen Robertson’s Friday Funnies have become a fun start to the weekend. We thank him for this one: “Fresh out of business school, a young man answered a job ad for an accountant. He was interviewed by a nervous businessman who told him: “I need someone with an accounting degree, but mainly I m looking for someone to do my worrying for me.”

“Excuse me?” the accountant said. “I worry about a lot of things,” the man said.

“But I don’t want to have to worry about

>> Dab hand at pleasing fans What was your highlight of Scotland’s Six Nations campaign? Yes, there were some!

Those final nail-biting moments in Rome before Duncan Weir’s drop-goal was dispatched between the posts for a rare 21-20 victory will never be forgotten.

For those of us lucky to be in the Olympic Stadium in Rome we have Derek Stark to thank. His Dab Events tour organisation, with match tickets, hotel rooms and direct flights from both Edinburgh and Glasgow, were a triumph. Both charter flights were packed full of Scots rugby fans for the weekend magic in the Eternal City. This was the first time the flight had gone directly from Edinburgh and can only be viewed as an enormous improvement for east-coasters.

There were so many familiar Scottish business faces on the ‘Starky Tours’ flights, and lots

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money. Your job will be to take all the money worries off my back.”

“How much does the job pay?, asked the accountant. “I’ll start you at £80,000, ” said the businessman.

“How can such a small business afford a sum like that?” the accountant asked.

“That,” the businessman said, “is your first worry.”

>> Union’s stamp of approval Here’s a Scottish independence question posed by the Institute of Directors’ chairman in Scotland. Ian McKay, a former director to the Royal Mail Group in Scotland, pointed out that the Royal Mail is a British institution that ensures the cost of posting across the UK remains the same. The Mail is paid for by those who buy stamps and send packages. The major cost is in delivering these packages, especially to remote islands and Highland glens. Scotland is a net receiver of mail. We don’t buy enough stamps and send letters and packages. So what happens if we vote for independence? Who is going to pay for the Scottish Mail Service? The Scots, of course. Will those cottage industries in the North who use the service face extra costs?

You don’t need to be an economics genius to work that one out. This question will be seen as scaremongering by ‘Yes’ campaigners. But it seems like another of those hidden benefits of a Union that we’ve taken for granted.

>> And a Parting Shot

Research from MetLife shows more than half of over 55s are happy to work past standard retirement age. The study reveals that 54% of those aged 55+ want to keep working when they get to 65. However, one in four want to reduce their hours and work part-time.

This makes sense. Who really wants to work full-time beyond 65 if they can be sitting somewhere outside in the sunshine enjoying a glass of wine?

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EVENTS

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BQ’s business events diary gives you lots of time to forward plan. If you wish to add your event to the list send it to editor@bq-scotland.co.uk and please put ‘BQ events page’ in the subject heading

March

30 Connectivity Driving Growth, Thistle Hotel Aberdeen Airport, Argyll Road, Aberdeen, AB21 0AF – 7:00 to 9:00am – www.agcc.co.uk – 01224 343 900

20 Rising Stars – Rebecca Smith Mackenzie, Angels Share Hotel and Bar, Devils Cut, Edinburgh, EH2 4EL - www.edinburghchamber.co.uk – 0131 221 2998

May

26 Leith Lunch, Vittoria Restaurant, 113-115 Brunswick Street, Edinburgh, EH7 5HR – 12:30 to 2:30pm - www.edinburghchamber.co.uk – 0131 221 2998

2 The Reaction Chamber: Speed Networking Lunch, Chaophraya, The Townhouse, Nelson Mandela Place, Glasgow, G1 2LL, 12:00 to 2:30pm – www.glasgowchamberofcommerce.com – 0141 204 2121

26 SR:AM – Hydro Finance, HBJ Gateley, Exchange Tower, 19 Canning Street, Edinburgh, EH3 8EH, From 9:00am - www.scottishrenewables.com – 0141 353 4980

6 Devex 2014, AECC, Bridge of Don, Aberdeen, AB23 8BL, 9:00am to 5:00pm – www.aecc.co.uk – 01224 824824

26 SPE SMN 6th European Sand Management Forum, AECC, Bridge of Don, Aberdeen, AB23 8BL, 8:00am to 5:00pm – www.aecc.co.uk –01224 824 824

8 Glasgow Talks… with Rob Woodward, Chief Executive STV, STV Glasgow, Pacific Quay, Glasgow, G51 1PQ, 8:00 to 10:00am – www.glasgowchamberofcommerce.com – 0141 204 2121

April

8 Scottish Media Academy, Radio Forth Ltd, 13-17 Forth Street, Edinburgh, EH1 3LE – 6:00 to 8:00pm - www.edinburghchamber.co.uk – 0131 221 2998

2 Speed Networking, Surgeons’ Hall, Nicolson Street, EH8 9DW – 8:00 to 10:45am - www.edinburghchamber.co.uk – 0131 221 2998

8 Tour of the New Printing Press at DC Thomson’s, DC Thomson, 80 Kingsway East, Dundee, DD4, 10:30am to 1:00pm www.dundeeandanguschamber.co.uk – 01382 228 441

2 Business Breakfast: The Wider Impact of Tourism on the Business Environment, SECC, Exhibition Way, Glasgow, G3 8YN, 8:00 to 9:45am – www.glasgowchamberofcommerce.com – 0141 204 2121

9 The 2014 Ryder Cup Official Charities Gala Dinner, Gleneagles Hotel, Auchterarder, Perthshire, PH3 1NF, 6:00 to 11:00pm www.dundeeandanguschamber.co.uk – 01382 228 441

3 Networking Lunch at STEAK, STEAK, 14A Picardy Place, Edinburgh, EH1 3JT, 12:30 to 2:00pm - www.edinburghchamber.co.uk – 0131 221 2998

14 Glasgow Talks… with Katherine Grainger, Hilton Glasgow, Williams Street, Glasgow, G3 8HT, 6:00 to 9:30pm – www.glasgowchamberofcommerce.com – 0141 204 2121

7 Women Ahead: Special Independence Referendum Debate, McCance Building, University of Strathclyde, Glasgow, G1 1XQ, 6:00 to 9:00pm – www.dundeeandanguschamber.co.uk – 01382 228 441

20 BioDundee Conference 2014, Westpark Convention Centre, Dundee, DD2 1NN, 9:00am to 3:45pm – www.biodundee.co.uk – 01382 434 913

14 Aesthetics in Prosthodontics, (BSSPD 2014 Annual Conference), Dundee & Angus Convention Bureau, City Development, Floor 6, Dundee House, 50 North Lindsay Street, Dundee, DD1 1LS, 8:45am to 5:30pm – www.conventiondundeeandangus.co.uk – 01382 434 318 16 Behind The Scenes… at Whitelee Wind farm, Whitelee Wind farm Visitor Centre, Moor Road, Eaglesham, G76 0QQ, 8:00 to 10:00am – www.glasgowchamberofcommerce.com – 0141 204 2121

23 City Connections, Norwood Hall Hotel, Garthdee Road, Cults, Aberdeen, AB15 9FX, 11:45am to 2:00pm – www.agcc.co.uk – 01224 343 900 26 Maximise Your Membership, AGCC, The Hub, Exploration Drive, Aberdeen Energy Park, Bridge Of Don, Aberdeen, AB23 8GX, 11:45am to 2:00pm – www.agcc.co.uk – 01224 343 900

23 Memories, Identities and Communities Conference 2014, Dundee & Angus Convention Bureau, City Development, Floor 6, Dundee House, 50 North Lindsay Street, Dundee, DD1 1LS, 8:30am to 5:30pm – www.conventiondundeeandangus.co.uk – 01382 434 318 23 The 19th North Sea Offshore Crane & Lifting Conference, AECC, Bridge of Don, Aberdeen, AB23 8BL, 8:00am to 5:15pm – www.aecc.co.uk – 01224 824 824 23 Harnessing Scotland’s Marine Energy Potential, Fife Renewables Innovation Centre, Methil, Ajax Way, Leven, Fife, KY8 3RS, 9:00am to 11.30am – www.scottishrenewables.com – 0141 353 4980 24 Whisky Tasting, B&B Edinburgh, 3 Rothesay Terrace, Edinburgh, EH3 7RY – 6:00 to 8:30pm – www.edinburghchamber.co.uk - 0131 2212998 24 Glasgow Talks… Football, Hampden Park, Glasgow, G42 9BA, 8:00am to 10:00am - www.glasgowchamberofcommerce.com - 0141 204 2121

BUSINESS QUARTER | SPRING 14

21 All Energy 2014 Business Breakfast, Boyd Orr Hall, AECC, Bridge of Don, Aberdeen, AB23 8BL, 6:45 to 8:45am – www.all-energy.co.uk – 020 8271 2179 21 All-Energy Business Breakfast, AECC, Bridge Of Don, Aberdeen, AB23 8BL, 6:45 to 8:45am – www.agcc.co.uk – 01224 343 900

22 CILIPS Discovery Day: Putting Research into Practice, Robert Gordon University, Garthdee Campus, Aberdeen, AB10 7QB, 9:30am to 4:30pm – www.cilips.org.uk – 0141 222 5785

28 SR Heat & Bioenergy Conference 2014, Perth Concert Hall, Mill Street, Perth, PH1 5HZ, 9:30am to 5:00pm - www.scottishrenewables.com – 0141 353 4980

21 All Energy 2014, AECC, Bridge of Don, Aberdeen, AB23 8BL, – www.aecc.co.uk – 01224 824 824

27 Decom Offshore2014, AECC, Bridge of Don, Aberdeen, AB23 8BL – www.aecc.co.uk – 01224 824 824 28 BQ Scottish Export Awards 2014. Glasgow Science Centre. www.bq-magazine.co.uk/export-awards. Contact Jackie Malloy on 07968 146 605 for further information or email Jackie@room501.co.uk

The diary is updated daily online at www.bq-magazine.co.uk Please check with contacts beforehand that arrangements have not changed. Events organisers are also asked to notify us at the above email address of any changes or cancellations as soon as they are known.

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Nothing in the world of technology exists in isolation, so it’s a huge

Much like in the world of F1, business technology continues

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to evolve so it’s inevitable that you’ll face key decisions.

drive your business as we are with the telecoms, connectivity and

Whether you’re looking for an immediate fix or a long term

infrastructure – both physical and virtual – that underpin them.

solution, call 0845 111 1888.

By Appointment to Her Majesty The Queen Information Technology Services Technology Services Group Newcastle upon Tyne

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