Bill Jamieson: Scotland, a business success story

We HEAD towards the eye of an economic storm. Whatever the indicator chosen – unemployment, manufacturing output, order books, retail sales, consumer confidence – the outlook is poor. In Europe and across America it is no better.

Were our fortunes to play out as forecasters predict, there would be little to get us out of bed each morning. Fortunately the bleak surveys and the stock market turbulence do not constitute the full story of our fortunes. But there is a danger that we will talk ourselves into a self-fulfilling depression.

So this morning I want to highlight some of the business and enterprise success stories, the ones that barely make it to the front pages of newspapers and the top items of TV news. Thin gruel you might think. In fact, there are many companies defying the gloom and planning ahead – that classic ingredient of entrepreneurs.

Last week I told the counter-intuitive story of the upmarket grocery chain Waitrose expanding in Scotland. If you ran its business model past the top consultants they’d shake their heads in disbelief. Expand in Scotland? At this time? Doomed to fail. Experience shows the contrary. Waitrose is a classic example of how a business with a well thought-out plan, focused management and keen attention to customer tastes can succeed against the macro-economic odds.

Scotland is not a knacker’s yard for enterprise. It is a great place to do business. And this is true across many sectors, and of companies big and small. We need to hear more of these successes and give more credit than we do to those making progress and planning to expand and prosper in the teeth of adversity. This roll call of the intrepid is by no means exhaustive and many more deserve a mention than space allows.

Growing business from online retailers has helped Glasgow-based packaging firm Macfarlane Group beat the consumer slowdown and post a 27 per cent rise in profits for the first half year. Pre-tax profit is up from £700,000 to £900,000.

Soft drinks group AG Barr is on course to hit full-year profit predictions. Despite a cold and wet spring and summer, sales at the company, famous for its Irn-Bru, rose 6 per cent in the 26 weeks to July. It expects half-year revenues up around 3.5 per cent to £123 million.

Aberdeen-based energy services heavyweight Wood Group has unveiled double-digit rises in turnover, profits and dividend. Half-year profits jumped 49 per cent after two deals reinforced its three world-leading market positions.

Profits at the aviation division of John Menzies surpassed its traditionally larger newspaper and magazine distribution arm for the first time in its 178-year history, rising 52 per cent to £13.8m in the six months to end June. Finance director Paul Dollman says the group was now ready to enter an “investment phase” and that it would continue to pursue acquisitions.

Transport group Stagecoach recently posted a 27.5 per cent increase in profits to £205.7m in the year to April – on turnover up 10 per cent at £2.4 billion, helped by growth at home and abroad – with an upbeat trading statement.

Need I go on? Oh, why not. Optos, the quoted Dunfermline-based eye scanning machine maker is on course to launch “the most important device in its history” in America after receiving approval from the US Food and Drug Administration.

Whisky giant Diageo has pushed up Johnnie Walker sales 16 per cent in emerging markets in Asia and a fifth in Latin America and Africa in the year to July. Operating profit is up 5 per cent at £2.9bn. It is spending £86m on a new bottling plant at Leven and £40m on a new distillery at Roseisle in Speyside. More investment has been hinted.

Scottish oil explorer Faroe Petroleum has struck oil west of the Shetlands, boosting hopes that the Atlantic Margin area could provide the next generation of North Sea oil.

Earlier this week our business pages reported a 19 per cent profits surge to $8.7m (£5.3m) at Edinburgh-based software firm Craneware, which provides finance software to US firms. It has a record pipeline of orders. On the lighter side of things, we covered the progress of AIM-listed Edinburgh-based dating website operator Cupid. It has just posted a near threefold rise in half-year sales.

Back on the big board, the FTSE100 constituent Weir Group recently unveiled pre-tax profit 24 per cent up at £178m for the 26 weeks to July on sales up by a third a more than £1bn. It is a barn-storming performer. Orders are up 43 per cent and the group is on course to double 2009 profits by 2014 to £374m.

Then there’s fellow FTSE100 constituent Aggreko, darling of the stock market when there are all too few of those. The temporary power supplier recently announced a 17 per cent rise in half-year underlying profits and stands to benefit from next year’s sporting bonanza which will feature a number of high-profile events, notably the London Olympics for which it was awarded a £30m contract.

And let’s not forget Asco Group, the Aberdeen-based £500m-a-year energy logistics business, looking for fresh investment after doubling its revenues in five years to £517m. Profits rose 7 per cent last year to £29.2m.

There are many more who could qualify for mention. Sceptics say none of this counts: it is prospects that matter, not historic results. But that has been true at all times. And the nature of enterprise has been a permanent defiance of uncertainty and the most daunting odds.

It is Schumpeter, student of the business cycle, innovation and creative destruction, who should be our guide in what lies ahead. Well-managed companies, focused on their markets and opportunities for growth, will continue to prosper. The Keynesian cupboard is bare. And in any event those cries for more government stimulus or a “Plan B” would ring a little more convincingly had not Holyrood’s draft 2011-12 budget revealed a cut in the spending allocation for enterprise, energy and tourism and a reduction to just 1.2 per cent of the Scottish Government total. This is a pathetic amount. It is like sending out our enterprise sector in a snowstorm dressed in only a bikini. More adjustment to priorities here is surely needed to boost growth prospects before letting out an all-too predictable howl for more funds.

Bleak though it all looks and cold as it will be, it is business innovation, business enterprise and the dedicated entrepreneur who will lighten the darkness ahead – just as they have always done.